Ramco Industries' (NSE:RAMCOIND) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Ramco Industries Limited (NSE:RAMCOIND) has announced that the dividend on 12th of September will be increased to ₹1.00, which will be 33% higher than last year's payment of ₹0.75 which covered the same period. Even though the dividend went up, the yield is still quite low at only 0.3%.

We've discovered 2 warning signs about Ramco Industries. View them for free.

Ramco Industries' Projected Earnings Seem Likely To Cover Future Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. However, Ramco Industries' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 0.5% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 6.4%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Ramco Industries

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was ₹0.25, compared to the most recent full-year payment of ₹0.75. This means that it has been growing its distributions at 12% per annum 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.

Ramco Industries 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. However, Ramco Industries' EPS was effectively flat over the past five years, which could stop the company from paying more every year. While EPS growth is quite low, Ramco Industries has the option to increase the payout ratio to return more cash to shareholders.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. 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, Ramco Industries has 2 warning signs (and 1 which is potentially serious) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.