Indian Metals and Ferro Alloys (NSE:IMFA) Is Paying Out Less In Dividends Than Last Year

Indian Metals and Ferro Alloys Limited's (NSE:IMFA) dividend is being reduced from last year's payment covering the same period to ₹5.00 on the 25th of August. This payment takes the dividend yield to 2.9%, which only provides a modest boost to overall returns.

See our latest analysis for Indian Metals and Ferro Alloys

Indian Metals and Ferro Alloys' Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. However, Indian Metals and Ferro Alloys' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 3.9% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 26% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ₹2.50 in 2013, and the most recent fiscal year payment was ₹10.00. This means that it has been growing its distributions at 15% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Indian Metals and Ferro Alloys 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 have grown at around 3.9% a year for the past five years, which isn't massive but still better than seeing them shrink. If Indian Metals and Ferro Alloys is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On Indian Metals and Ferro Alloys' Dividend

Overall, while it's not great to see that the dividend has been cut, we think the company is now in a good position to make consistent payments going into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Indian Metals and Ferro Alloys that investors need to be conscious of moving forward. Is Indian Metals and Ferro Alloys not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.