Supreme Industries (NSE:SUPREMEIND) Has Announced That It Will Be Increasing Its Dividend To ₹8.00

The Supreme Industries Limited (NSE:SUPREMEIND) will increase its dividend on the 29th of November to ₹8.00, which is 33% higher than last year's payment from the same period of ₹6.00. This takes the annual payment to 0.6% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Supreme Industries

Supreme Industries' Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Supreme Industries was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is earning enough to make the dividend feasible, but the cash payout ratio of 86% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.

Looking forward, earnings per share is forecast to rise by 50.8% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 26% by next year, which is in a pretty sustainable range.

Supreme Industries Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was ₹7.50 in 2013, and the most recent fiscal year payment was ₹26.00. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Supreme Industries has grown earnings per share at 14% 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, it's great to see that the company can raise the dividend and keep it in a sustainable range. On the plus side, the dividend looks sustainable by most measures but it is let down by the lack of cash flows. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 24 analysts we track are forecasting for Supreme Industries for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.