Oriental Carbon & Chemicals (NSE:OCCL) Will Pay A Dividend Of ₹7.00

The board of Oriental Carbon & Chemicals Limited (NSE:OCCL) has announced that it will pay a dividend of ₹7.00 per share on the 29th of August. This makes the dividend yield 1.9%, which will augment investor returns quite nicely.

View our latest analysis for Oriental Carbon & Chemicals

Oriental Carbon & Chemicals' Earnings Easily Cover The Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, Oriental Carbon & Chemicals' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 11.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ₹5.00 in 2014 to the most recent total annual payment of ₹14.00. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year 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 Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's not great to see that Oriental Carbon & Chemicals' earnings per share has fallen at approximately 8.9% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Our Thoughts On Oriental Carbon & Chemicals' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Oriental Carbon & Chemicals' payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Oriental Carbon & Chemicals is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Oriental Carbon & Chemicals that investors should take into consideration. Is Oriental Carbon & Chemicals not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.

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