Fairchem Organics (NSE:FAIRCHEMOR) Has Announced A Dividend Of ₹7.50

Fairchem Organics Limited (NSE:FAIRCHEMOR) will pay a dividend of ₹7.50 on the 4th of September. This payment means the dividend yield will be 0.5%, which is below the average for the industry.

View our latest analysis for Fairchem Organics

Fairchem Organics' Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Fairchem Organics was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 3.1% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 23%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 implies that the company grew its distributions at a yearly rate of about 29% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Fairchem Organics May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been crawling upwards at 3.1% per year. If Fairchem Organics is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

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. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Fairchem Organics has 2 warning signs (and 1 which is a bit concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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