Shree Cement (NSE:SHREECEM) Is Increasing Its Dividend To ₹60.00

Shree Cement Limited (NSE:SHREECEM) will increase its dividend from last year's comparable payment on the 3rd of September to ₹60.00. Based on this payment, the dividend yield for the company will be 0.4%, which is fairly typical for the industry.

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Shree Cement's Projected Earnings Seem Likely To Cover Future Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, Shree Cement was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 107.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 19%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Shree Cement

Shree Cement Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ₹22.00 in 2015, and the most recent fiscal year payment was ₹110.00. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth May Be Hard To Come By

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Over the past five years, it looks as though Shree Cement's EPS has declined at around 6.5% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Shree Cement that investors need to be conscious of moving forward. Is Shree Cement not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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