Astra Microwave Products' (NSE:ASTRAMICRO) Dividend Will Be Increased To ₹2.00

Astra Microwave Products Limited (NSE:ASTRAMICRO) has announced that it will be increasing its dividend from last year's comparable payment on the 29th of August to ₹2.00. Although the dividend is now higher, the yield is only 0.2%, which is below the industry average.

View our latest analysis for Astra Microwave Products

Astra Microwave Products' Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Astra Microwave Products was earning enough to cover the dividend, but free cash flows weren't positive. 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.

Over the next year, EPS is forecast to expand by 65.5%. If the dividend continues on this path, the payout ratio could be 10.0% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ₹1.10 in 2014 to the most recent total annual payment of ₹2.00. This works out to be a compound annual growth rate (CAGR) of approximately 6.2% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Astra Microwave Products has grown earnings per share at 62% 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.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Astra Microwave Products is earning enough to cover the payments, the cash flows are lacking. We don't think Astra Microwave Products 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Astra Microwave Products 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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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.

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