Shree Pushkar Chemicals & Fertilisers (NSE:SHREEPUSHK) Is Increasing Its Dividend To ₹2.00

Shree Pushkar Chemicals & Fertilisers Limited (NSE:SHREEPUSHK) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of October to ₹2.00. This will take the dividend yield to an attractive 0.9%, providing a nice boost to shareholder returns.

See our latest analysis for Shree Pushkar Chemicals & Fertilisers

Shree Pushkar Chemicals & Fertilisers' Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Shree Pushkar Chemicals & Fertilisers 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 11.4% over the next 12 months. If the dividend continues on this path, the payout ratio could be 10% by next year, which we think can be pretty sustainable going forward.

Shree Pushkar Chemicals & Fertilisers' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of ₹1.00 in 2015 to the most recent total annual payment of ₹2.00. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Shree Pushkar Chemicals & Fertilisers has impressed us by growing EPS at 11% per 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 Shree Pushkar Chemicals & Fertilisers' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 3 warning signs for Shree Pushkar Chemicals & Fertilisers that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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