Tata Chemicals (NSE:TATACHEM) Is Increasing Its Dividend To ₹17.50

The board of Tata Chemicals Limited (NSE:TATACHEM) has announced that it will be paying its dividend of ₹17.50 on the 26th of July, an increased payment from last year's comparable dividend. This will take the annual payment to 1.8% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Tata Chemicals

Tata Chemicals' Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, Tata Chemicals' 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 fall by 3.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 21%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Tata Chemicals Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ₹10.00 in 2013, and the most recent fiscal year payment was ₹17.50. This works out to be a compound annual growth rate (CAGR) of approximately 5.8% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Tata Chemicals has been growing its earnings per share at 13% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Tata Chemicals' prospects of growing its dividend payments in the future.

We Really Like Tata Chemicals' Dividend

Overall, a dividend increase is always good, and we think that Tata Chemicals is a strong income stock thanks to its track record and growing earnings. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 7 analysts we track are forecasting for Tata Chemicals for free with public analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield 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.