Sharda Cropchem's (NSE:SHARDACROP) Dividend Will Be ₹3.00

Sharda Cropchem Limited's (NSE:SHARDACROP) investors are due to receive a payment of ₹3.00 per share on 1st of September. Based on this payment, the dividend yield will be 0.9%, which is fairly typical for the industry.

See our latest analysis for Sharda Cropchem

Sharda Cropchem's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. 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. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

The next year is set to see EPS grow by 52.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 11%, which is in the range that makes us comfortable with the sustainability of the dividend.

Sharda Cropchem Doesn't Have A Long Payment History

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 dividend has gone from an annual total of ₹2.50 in 2015 to the most recent total annual payment of ₹6.00. This means that it has been growing its distributions at 13% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Sharda Cropchem has been growing its earnings per share at 13% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Sharda Cropchem's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Sharda Cropchem's payments, as there could be some issues with sustaining them into the future. While Sharda Cropchem is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

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. As an example, we've identified 1 warning sign for Sharda Cropchem that you should be aware of before investing. 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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