Orient Ceratech (NSE:ORIENTCER) Has Affirmed Its Dividend Of ₹0.25

Orient Ceratech Limited (NSE:ORIENTCER) will pay a dividend of ₹0.25 on the 30th of October. Including this payment, the dividend yield on the stock will be 0.5%, which is a modest boost for shareholders' returns.

See our latest analysis for Orient Ceratech

Orient Ceratech's Payment Could Potentially Have 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. Based on the last payment, Orient Ceratech was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Unless the company can turn things around, EPS could fall by 0.4% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 17%, which is definitely feasible to continue.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from ₹0.20 total annually to ₹0.25. This implies that the company grew its distributions at a yearly rate of about 2.3% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Orient Ceratech 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. Orient Ceratech hasn't seen much change in its earnings per share over the last five years.

Orient Ceratech's Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Orient Ceratech's payments, as there could be some issues with sustaining them into the future. While Orient Ceratech is earning enough to cover the payments, the cash flows are lacking. We don't think Orient Ceratech 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. To that end, Orient Ceratech has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about. Is Orient Ceratech 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.