Sree Rayalaseema Hi-Strength Hypo (NSE:SRHHYPOLTD) Is Due To Pay A Dividend Of ₹3.00

The board of Sree Rayalaseema Hi-Strength Hypo Limited (NSE:SRHHYPOLTD) has announced that it will pay a dividend of ₹3.00 per share on the 24th of October. Including this payment, the dividend yield on the stock will be 0.5%, which is a modest boost for shareholders' returns.

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Sree Rayalaseema Hi-Strength Hypo's Payment Could Potentially Have Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Sree Rayalaseema Hi-Strength Hypo was easily earning enough to cover the dividend. 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 15.9% over the next 12 months. If the dividend continues on this path, the payout ratio could be 5.4% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Sree Rayalaseema Hi-Strength Hypo

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ₹1.50 in 2015, and the most recent fiscal year payment was ₹3.00. This implies that the company grew its distributions at a yearly rate of about 7.2% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Sree Rayalaseema Hi-Strength Hypo has been growing its earnings per share at 16% a year over the past five years. Sree Rayalaseema Hi-Strength Hypo definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Sree Rayalaseema Hi-Strength Hypo's 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. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Sree Rayalaseema Hi-Strength Hypo that you should be aware of before investing. 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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