Sree Rayalaseema Hi-Strength Hypo's (NSE:SRHHYPOLTD) Upcoming Dividend Will Be Larger Than Last Year's

The board of Sree Rayalaseema Hi-Strength Hypo Limited (NSE:SRHHYPOLTD) has announced that it will be paying its dividend of ₹4.00 on the 21st of October, an increased payment from last year's comparable dividend. This takes the annual payment to 0.7% of the current stock price, which is about average for the industry.

Check out our latest analysis for Sree Rayalaseema Hi-Strength Hypo

Sree Rayalaseema Hi-Strength Hypo's Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, prior to this announcement, Sree Rayalaseema Hi-Strength Hypo's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 29.6% over the next 12 months. If the dividend continues on this path, the payout ratio could be 4.3% by next year, which we think can be pretty sustainable going forward.

Sree Rayalaseema Hi-Strength Hypo Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The dividend has gone from an annual total of ₹1.50 in 2015 to the most recent total annual payment of ₹4.00. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Sree Rayalaseema Hi-Strength Hypo has impressed us by growing EPS at 30% 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.

Sree Rayalaseema Hi-Strength Hypo Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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.

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. For example, we've identified 2 warning signs for Sree Rayalaseema Hi-Strength Hypo (1 is potentially serious!) that you should be aware of before investing. Is Sree Rayalaseema Hi-Strength Hypo 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.