Shivalik Bimetal Controls (NSE:SBCL) Is Paying Out A Dividend Of ₹0.50

The board of Shivalik Bimetal Controls Limited (NSE:SBCL) has announced that it will pay a dividend on the 8th of March, with investors receiving ₹0.50 per share. The dividend yield is 0.2% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for Shivalik Bimetal Controls

Shivalik Bimetal Controls' Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Shivalik Bimetal Controls was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

If the trend of the last few years continues, EPS will grow by 34.2% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 7.2% by next year, which is in a pretty sustainable range.

Shivalik Bimetal Controls' Dividend Has Lacked Consistency

It's comforting to see that Shivalik Bimetal Controls has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 6 years was ₹0.167 in 2017, and the most recent fiscal year payment was ₹1.00. This means that it has been growing its distributions at 35% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Shivalik Bimetal Controls has grown earnings per share at 34% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Our Thoughts On Shivalik Bimetal Controls' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. See if management have their own wealth at stake, by checking insider shareholdings in Shivalik Bimetal Controls stock. Is Shivalik Bimetal Controls not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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