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

Shree Pushkar Chemicals & Fertilisers Limited's (NSE:SHREEPUSHK) dividend will be increasing from last year's payment of the same period to ₹2.00 on 29th of October. This makes the dividend yield 0.9%, which is above the industry average.

View our latest analysis for Shree Pushkar Chemicals & Fertilisers

Shree Pushkar Chemicals & Fertilisers' Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Shree Pushkar Chemicals & Fertilisers' earnings easily covered the dividend, but free cash flows were negative. 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 along recent trends, we estimate the payout ratio will be 10%, which is in the range that makes us comfortable with the sustainability of the dividend.

Shree Pushkar Chemicals & Fertilisers' Dividend Has Lacked Consistency

It's comforting to see that Shree Pushkar Chemicals & Fertilisers 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. Since 2015, the annual payment back then was ₹1.00, compared to the most recent full-year payment of ₹2.00. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. Shree Pushkar Chemicals & Fertilisers has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

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 Shree Pushkar Chemicals & Fertilisers has grown earnings per share at 11% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Shree Pushkar Chemicals & Fertilisers' prospects of growing its dividend payments in the future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Shree Pushkar Chemicals & Fertilisers' payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for Shree Pushkar Chemicals & Fertilisers that investors should take into consideration. 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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