Astra Microwave Products (NSE:ASTRAMICRO) Is Increasing Its Dividend To ₹1.40

Astra Microwave Products Limited (NSE:ASTRAMICRO) has announced that it will be increasing its dividend from last year's comparable payment on the 21st of September to ₹1.40. This takes the dividend yield to 0.7%, which shareholders will be pleased with.

View our latest analysis for Astra Microwave Products

Astra Microwave Products' Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, Astra Microwave Products' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Unless the company can turn things around, EPS could fall by 8.0% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 36%, which is definitely feasible to continue.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ₹0.50 in 2012, and the most recent fiscal year payment was ₹1.40. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Astra Microwave Products has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth Is Doubtful

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. Astra Microwave Products has seen earnings per share falling at 8.0% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

Our Thoughts On Astra Microwave Products' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Astra Microwave Products' payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Astra Microwave Products (1 can't be ignored!) that you should be aware of before investing. Is Astra Microwave Products not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.