Tata Metaliks' (NSE:TATAMETALI) Dividend Will Be Increased To ₹8.00

Tata Metaliks Limited's (NSE:TATAMETALI) dividend will be increasing from last year's payment of the same period to ₹8.00 on 1st of September. Even though the dividend went up, the yield is still quite low at only 1.1%.

View our latest analysis for Tata Metaliks

Tata Metaliks' Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. However, Tata Metaliks' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 0.5% over the next 12 months. If the dividend continues on this path, the payout ratio could be 21% by next year, which we think can be pretty sustainable going forward.

Tata Metaliks' Dividend Has Lacked Consistency

Looking back, Tata Metaliks' dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of ₹2.00 in 2016 to the most recent total annual payment of ₹8.00. This means that it has been growing its distributions at 26% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Tata Metaliks May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, Tata Metaliks' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. While growth may be thin on the ground, Tata Metaliks could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Tata Metaliks' Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Tata Metaliks that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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