Coromandel International (NSE:COROMANDEL) Will Pay A Dividend Of ₹6.00

The board of Coromandel International Limited (NSE:COROMANDEL) has announced that it will pay a dividend of ₹6.00 per share on the 5th of March. This means the annual payment is 1.5% of the current stock price, which is above the average for the industry.

View our latest analysis for Coromandel International

Coromandel International's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Coromandel International's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 11.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 25%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The first annual payment during the last 10 years was ₹7.00 in 2012, and the most recent fiscal year payment was ₹12.00. This works out to be a compound annual growth rate (CAGR) of approximately 5.5% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Coromandel International has seen EPS rising for the last five years, at 26% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like Coromandel International's Dividend

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Coromandel International that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.

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