Sumitomo Chemical India's (NSE:SUMICHEM) Dividend Will Be Increased To ₹1.00

The board of Sumitomo Chemical India Limited (NSE:SUMICHEM) has announced that it will be increasing its dividend on the 28th of August to ₹1.00. This takes the annual payment to 0.2% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for Sumitomo Chemical India

Sumitomo Chemical India's Earnings Easily Cover the Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Sumitomo Chemical India was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 20.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 9.8% by next year, which is in a pretty sustainable range.

Sumitomo Chemical India Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. The first annual payment during the last 2 years was ₹0.55 in 2020, and the most recent fiscal year payment was ₹1.00. This works out to be a compound annual growth rate (CAGR) of approximately 35% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

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 24% 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.

Sumitomo Chemical India Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Sumitomo Chemical India is a strong income stock thanks to its track record and growing earnings. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 1 warning sign for Sumitomo Chemical India that you should be aware of before investing. Is Sumitomo Chemical India not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.