Supreme Industries (NSE:SUPREMEIND) Is Paying Out A Larger Dividend Than Last Year

The Supreme Industries Limited (NSE:SUPREMEIND) has announced that it will be increasing its dividend from last year's comparable payment on the 27th of July to ₹24.00. This takes the annual payment to 0.9% of the current stock price, which is about average for the industry.

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Supreme Industries' Future Dividend Projections Appear Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Supreme Industries' dividend was only 45% of earnings, however it was paying out 381% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

The next year is set to see EPS grow by 58.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 32% by next year, which is in a pretty sustainable range.

View our latest analysis for Supreme Industries

Supreme Industries Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of ₹8.00 in 2015 to the most recent total annual payment of ₹34.00. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. 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

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 16% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Supreme Industries is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Supreme Industries that you should be aware of before investing. 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.