Sarthak Metals (NSE:SMLT) Is Due To Pay A Dividend Of ₹1.00

Sarthak Metals Limited's (NSE:SMLT) investors are due to receive a payment of ₹1.00 per share on 20th of September. This payment means the dividend yield will be 0.7%, which is below the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Sarthak Metals' stock price has increased by 50% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Sarthak Metals

Sarthak Metals' Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. However, Sarthak Metals' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share could rise by 44.3% 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 8.2% by next year, which is in a pretty sustainable range.

Sarthak Metals' Dividend Has Lacked Consistency

Looking back, Sarthak Metals' dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2017, the dividend has gone from ₹0.50 total annually to ₹2.00. This means that it has been growing its distributions at 26% per annum over that time. Sarthak Metals 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

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Sarthak Metals has impressed us by growing EPS at 44% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Sarthak Metals' Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 3 warning signs for Sarthak Metals that investors should know about before committing capital to this stock. Is Sarthak Metals 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.