Thangamayil Jewellery's (NSE:THANGAMAYL) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Thangamayil Jewellery Limited (NSE:THANGAMAYL) has announced that it will be paying its dividend of ₹12.50 on the 27th of August, an increased payment from last year's comparable dividend. This will take the annual payment to 0.7% of the stock price, which is above what most companies in the industry pay.

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Thangamayil Jewellery's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Thangamayil Jewellery's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 160.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 15%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Thangamayil Jewellery

Thangamayil Jewellery Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was ₹0.50 in 2015, and the most recent fiscal year payment was ₹12.50. This implies that the company grew its distributions at a yearly rate of about 38% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Thangamayil Jewellery has impressed us by growing EPS at 18% 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.

We should note that Thangamayil Jewellery has issued stock equal to 13% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

Our Thoughts On Thangamayil Jewellery's Dividend

Overall, we always like to see the dividend being raised, but we don't think Thangamayil Jewellery will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Thangamayil Jewellery (of which 2 are significant!) you should know about. Is Thangamayil Jewellery not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.