Supreme Industries' (NSE:SUPREMEIND) Dividend Will Be Increased To ₹18.00

The Supreme Industries Limited's (NSE:SUPREMEIND) dividend will be increasing to ₹18.00 on 29th of July. This takes the dividend yield from 1.2% to 1.2%, which shareholders will be pleased with.

Check out our latest analysis for Supreme Industries

Supreme Industries' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Supreme Industries' dividend was only 31% of earnings, however it was paying out 62,217% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to fall by 3.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 38%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Supreme Industries Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the dividend has gone from ₹4.30 to ₹24.00. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Supreme Industries has impressed us by growing EPS at 18% per year over the past five years. Supreme Industries definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Supreme Industries' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Supreme Industries' payments are rock solid. While Supreme Industries is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for Supreme Industries (of which 1 is concerning!) you should know about. 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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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.