Shipping Corporation of India (NSE:SCI) Is Increasing Its Dividend To ₹0.50

The board of The Shipping Corporation of India Limited (NSE:SCI) has announced that it will be paying its dividend of ₹0.50 on the 18th of October, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 0.2%, which is below the industry average.

View our latest analysis for Shipping Corporation of India

Shipping Corporation of India's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, Shipping Corporation of India's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 51.8% over the next 12 months. If the dividend continues on this path, the payout ratio could be 1.7% by next year, which we think can be pretty sustainable going forward.

Shipping Corporation of India's Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. Since 2020, the dividend has gone from ₹0.75 total annually to ₹0.50. This works out to be a decline of approximately 9.6% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. We are encouraged to see that Shipping Corporation of India has grown earnings per share at 52% 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.

Shipping Corporation of India Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Shipping Corporation of India is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend 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 instance, we've picked out 1 warning sign for Shipping Corporation of India that investors should take into consideration. 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.