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

Sarthak Metals Limited's (NSE:SMLT) investors are due to receive a payment of ₹1.00 per share on 5th of October. This payment means the dividend yield will be 1.7%, which is below the average for the industry.

See our latest analysis for Sarthak Metals

Sarthak Metals' Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, Sarthak Metals' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 48.9% over the next 12 months. If the dividend continues on this path, the payout ratio could be 7.9% by next year, which we think can be pretty sustainable going forward.

Sarthak Metals' Dividend Has Lacked Consistency

It's comforting to see that Sarthak Metals has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the annual payment back then was ₹0.50, compared to the most recent full-year payment of ₹2.00. This means that it has been growing its distributions at 32% per annum over that time. 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Sarthak Metals has seen EPS rising for the last five years, at 49% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like Sarthak Metals' Dividend

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. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 2 warning signs for Sarthak Metals that investors should know about before committing capital to this stock. 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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