Savita Oil Technologies (NSE:SOTL) Is Due To Pay A Dividend Of ₹4.00

The board of Savita Oil Technologies Limited (NSE:SOTL) has announced that it will pay a dividend on the 25th of October, with investors receiving ₹4.00 per share. This payment means that the dividend yield will be 0.7%, which is around the industry average.

View our latest analysis for Savita Oil Technologies

Savita Oil Technologies' Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, prior to this announcement, Savita Oil Technologies' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 9.0% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 16% by next year, which is in a pretty sustainable range.

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 ₹3.50 in 2014 to the most recent total annual payment of ₹4.00. This means that it has been growing its distributions at 1.3% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Savita Oil Technologies Could Grow Its Dividend

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 9.0% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Savita Oil Technologies' prospects of growing its dividend payments in the future.

We Really Like Savita Oil Technologies' 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. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Savita Oil Technologies that investors should take into consideration. 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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