Sumitomo Chemical India (NSE:SUMICHEM) Will Pay A Larger Dividend Than Last Year At ₹1.20

The board of Sumitomo Chemical India Limited (NSE:SUMICHEM) has announced that it will be paying its dividend of ₹1.20 on the 27th of August, an increased payment from last year's comparable dividend. This takes the annual payment to 0.3% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Sumitomo Chemical India

Sumitomo Chemical India's Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, Sumitomo Chemical India's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 64.0% over the next year. If the dividend continues on this path, the payout ratio could be 9.6% by next year, which we think can be pretty sustainable going forward.

Sumitomo Chemical India Doesn't Have A Long Payment History

Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from an annual total of ₹0.55 in 2020 to the most recent total annual payment of ₹1.20. This means that it has been growing its distributions at 30% per annum over that time. Sumitomo Chemical India has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Sumitomo Chemical India has grown earnings per share at 28% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Sumitomo Chemical India's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 7 Sumitomo Chemical India analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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