Astra Microwave Products (NSE:ASTRAMICRO) Will Pay A Larger Dividend Than Last Year At ₹2.00

Astra Microwave Products Limited's (NSE:ASTRAMICRO) dividend will be increasing from last year's payment of the same period to ₹2.00 on 29th of August. Even though the dividend went up, the yield is still quite low at only 0.2%.

Check out our latest analysis for Astra Microwave Products

Astra Microwave Products' Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Astra Microwave Products is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. 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

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was ₹1.10, compared to the most recent full-year payment of ₹2.00. This implies that the company grew its distributions at a yearly rate of about 6.2% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Astra Microwave Products has impressed us by growing EPS at 62% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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. If you are a dividend investor, you might also want to look at our curated list of high yield 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.

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