Savita Oil Technologies' (NSE:SOTL) Dividend Will Be ₹4.00

The board of Savita Oil Technologies Limited (NSE:SOTL) has announced that it will pay a dividend on the 22nd of October, with investors receiving ₹4.00 per share. Based on this payment, the dividend yield on the company's stock will be 1.0%, which is an attractive boost to shareholder returns.

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Savita Oil Technologies' Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Savita Oil Technologies was paying only paying out a fraction of earnings, but the payment was a massive 118% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share could rise by 11.3% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 23%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Savita Oil Technologies

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ₹0.50 in 2015 to the most recent total annual payment of ₹4.00. This means that it has been growing its distributions at 23% 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Savita Oil Technologies has impressed us by growing EPS at 11% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Savita Oil Technologies' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Savita Oil Technologies' payments, as there could be some issues with sustaining them into the future. While Savita Oil Technologies is earning enough to cover the payments, the cash flows are lacking. We don't think Savita Oil Technologies is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Savita Oil Technologies you should be aware of, and 1 of them can't be ignored. Is Savita Oil Technologies 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.