Sharda Cropchem (NSE:SHARDACROP) Will Pay A Dividend Of ₹3.00

The board of Sharda Cropchem Limited (NSE:SHARDACROP) has announced that it will pay a dividend on the 1st of September, with investors receiving ₹3.00 per share. Based on this payment, the dividend yield will be 0.9%, which is fairly typical for the industry.

View our latest analysis for Sharda Cropchem

Sharda Cropchem's Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, Sharda Cropchem was paying only paying out a fraction of earnings, but the payment was a massive 162% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to rise by 20.3% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 14% by next year, which is in a pretty sustainable range.

Sharda Cropchem Is Still Building Its Track Record

Sharda Cropchem's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The first annual payment during the last 7 years was ₹2.50 in 2015, and the most recent fiscal year payment was ₹6.00. This means that it has been growing its distributions at 13% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see Sharda Cropchem has been growing its earnings per share at 13% a year over the past five years. Sharda Cropchem definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Sharda Cropchem is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Sharda Cropchem that investors should know about before committing capital to this stock. Is Sharda Cropchem 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.