Sarthak Metals (NSE:SMLT) Is Paying Out A Dividend Of ₹1.00

The board of Sarthak Metals Limited (NSE:SMLT) has announced that it will pay a dividend of ₹1.00 per share on the 5th of October. This means the annual payment will be 1.9% of the current stock price, which is lower than the industry average.

View our latest analysis for Sarthak Metals

Sarthak Metals' Payment Has Solid Earnings Coverage

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.

Over the next year, EPS could expand by 47.4% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 8.4% 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. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2017, the annual payment back then was ₹0.50, compared to the most recent full-year payment of ₹2.00. This implies that the company grew its distributions at a yearly rate of about 32% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

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. We are encouraged to see that Sarthak Metals has grown earnings per share at 47% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Sarthak Metals Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 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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