Shree Pushkar Chemicals & Fertilisers' (NSE:SHREEPUSHK) Upcoming Dividend Will Be Larger Than Last Year's

Shree Pushkar Chemicals & Fertilisers Limited (NSE:SHREEPUSHK) has announced that it will be increasing its dividend from last year's comparable payment on the 29th of October to ₹2.00. Despite this raise, the dividend yield of 0.6% is only a modest boost to shareholder returns.

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Shree Pushkar Chemicals & Fertilisers' Payment Could Potentially Have Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. 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.

Looking forward, earnings per share could rise by 15.9% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 9.3% by next year, which is in a pretty sustainable range.

View our latest analysis for Shree Pushkar Chemicals & Fertilisers

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from ₹1.00 total annually to ₹2.00. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Shree Pushkar Chemicals & Fertilisers has impressed us by growing EPS at 16% per year over the past five years. Shree Pushkar Chemicals & Fertilisers definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

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. While Shree Pushkar Chemicals & Fertilisers is earning enough to cover the payments, the cash flows are lacking. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Shree Pushkar Chemicals & Fertilisers (of which 1 is a bit concerning!) you should know about. Is Shree Pushkar Chemicals & Fertilisers 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.