Fairchem Organics (NSE:FAIRCHEMOR) Has Affirmed Its Dividend Of ₹7.50

Fairchem Organics Limited's (NSE:FAIRCHEMOR) investors are due to receive a payment of ₹7.50 per share on 4th of September. Including this payment, the dividend yield on the stock will be 0.5%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Fairchem Organics

Fairchem Organics' Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, Fairchem Organics' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 3.1% if recent trends continue. If the dividend continues on this path, the payout ratio could be 23% by next year, which we think can be pretty sustainable going forward.

Fairchem Organics' Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The annual payment during the last 3 years was ₹3.50 in 2021, and the most recent fiscal year payment was ₹7.50. This means that it has been growing its distributions at 29% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Fairchem Organics has only grown its earnings per share at 3.1% per annum over the past five years. While growth may be thin on the ground, Fairchem Organics could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Fairchem Organics' Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Fairchem Organics you should be aware of, and 1 of them can't be ignored. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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