Arvind SmartSpaces (NSE:ARVSMART) Is Increasing Its Dividend To ₹6.00

Arvind SmartSpaces Limited (NSE:ARVSMART) has announced that it will be increasing its dividend from last year's comparable payment on the 7th of September to ₹6.00. This makes the dividend yield 0.9%, which is above the industry average.

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Arvind SmartSpaces' Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Arvind SmartSpaces' earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to rise by 10.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 27% by next year, which is in a pretty sustainable range.

See our latest analysis for Arvind SmartSpaces

Arvind SmartSpaces' Dividend Has Lacked Consistency

Looking back, Arvind SmartSpaces' dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2019, the dividend has gone from ₹1.50 total annually to ₹6.00. This implies that the company grew its distributions at a yearly rate of about 26% over that duration. 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.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Arvind SmartSpaces has grown earnings per share at 17% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Arvind SmartSpaces' payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Arvind SmartSpaces is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Arvind SmartSpaces (1 is a bit concerning!) 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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