Pidilite Industries' (NSE:PIDILITIND) Shareholders Will Receive A Bigger Dividend Than Last Year

Pidilite Industries Limited's (NSE:PIDILITIND) dividend will be increasing from last year's payment of the same period to ₹11.00 on 9th of September. This takes the annual payment to 0.4% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Pidilite Industries

Pidilite Industries' Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. The last dividend was quite easily covered by Pidilite Industries' earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 102.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 25%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ₹2.60 in 2013 to the most recent total annual payment of ₹11.00. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. Pidilite Industries has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Has Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Pidilite Industries has been growing its earnings per share at 5.7% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Our Thoughts On Pidilite Industries' Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 Pidilite Industries that investors need to be conscious of moving forward. Is Pidilite Industries 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.