Thirumalai Chemicals' (NSE:TIRUMALCHM) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Thirumalai Chemicals Limited (NSE:TIRUMALCHM) has announced that it will be increasing its dividend on the 26th of August to ₹2.50. This makes the dividend yield 1.0%, which is above the industry average.

Check out our latest analysis for Thirumalai Chemicals

Thirumalai Chemicals' Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, Thirumalai Chemicals' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 31.8% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 8.3%, which is in the range that makes us comfortable with the sustainability of the dividend.

Thirumalai Chemicals' Dividend Has Lacked Consistency

Looking back, Thirumalai Chemicals' dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The first annual payment during the last 9 years was ₹1.00 in 2013, and the most recent fiscal year payment was ₹2.50. This means that it has been growing its distributions at 11% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Thirumalai Chemicals has impressed us by growing EPS at 32% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Thirumalai Chemicals Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Thirumalai Chemicals is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Thirumalai Chemicals that you should be aware of before investing. Is Thirumalai Chemicals not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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