Shankara Building Products (NSE:SHANKARA) Has Affirmed Its Dividend Of ₹3.00

Shankara Building Products Limited (NSE:SHANKARA) will pay a dividend of ₹3.00 on the 24th of July. This makes the dividend yield 0.3%, which will augment investor returns quite nicely.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Shankara Building Products' stock price has increased by 60% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Shankara Building Products' Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Shankara Building Products' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 11.6% over the next 12 months. If the dividend continues on this path, the payout ratio could be 8.7% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Shankara Building Products

Shankara Building Products' Dividend Has Lacked Consistency

Shankara Building Products has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the dividend has gone from ₹2.75 total annually to ₹3.00. This means that it has been growing its distributions at 1.1% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Shankara Building Products has been growing its earnings per share at 12% a year over the past five years. Shankara Building Products definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Shankara Building Products Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Shankara Building Products (1 is 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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