Sadhana Nitro Chem (NSE:SADHNANIQ) Has Affirmed Its Dividend Of ₹0.15

Sadhana Nitro Chem Limited (NSE:SADHNANIQ) has announced that it will pay a dividend of ₹0.15 per share on the 25th of October. This means the annual payment will be 0.2% of the current stock price, which is lower than the industry average.

See our latest analysis for Sadhana Nitro Chem

Sadhana Nitro Chem Is Paying Out More Than It Is Earning

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Sadhana Nitro Chem was paying out a fairly large proportion of earnings, and it wasn't generating positive free cash flows either. This is a pretty unsustainable practice, and could be risky if continued for the long term.

Looking forward, EPS could fall by 40.4% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 145%, which is definitely a bit high to be sustainable going forward.

Sadhana Nitro Chem's Dividend Has Lacked Consistency

Sadhana Nitro Chem has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2018, the annual payment back then was ₹0.039, compared to the most recent full-year payment of ₹0.15. This means that it has been growing its distributions at 25% 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.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 40% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Sadhana Nitro Chem'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 Sadhana Nitro Chem's payments, as there could be some issues with sustaining them into the future. The track record isn't great, and the payments are a bit high to be considered sustainable. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Sadhana Nitro Chem that investors should know about before committing capital to this stock. Is Sadhana Nitro Chem not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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