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Shanthi Gears (NSE:SHANTIGEAR) Has Announced A Dividend Of ₹2.00

The board of Shanthi Gears Limited (NSE:SHANTIGEAR) has announced that it will pay a dividend on the 28th of August, with investors receiving ₹2.00 per share. This payment will result in a dividend yield of 0.9%, providing a boost to shareholder returns.

Prior to this announcement, Shanthi Gears’ dividend was only 50% of earnings, but it was paying out 236% of free cash flows. While this indicates a focus on returning cash flow to shareholders, it also suggests that the dividend may be at risk of future cuts.

If the trend of the last few years continues, EPS is projected to grow by 21.3% over the next 12 months. This growth could lead to a payout ratio of 48% by next year, which we believe is sustainable going forward.

The company has a history of dividend cuts, with the annual payment fluctuating over the past 10 years. Despite this volatility, the dividend has shown strong growth, with a compound annual growth rate of approximately 24% over that time.

With a relatively unstable dividend, it is important to assess if earnings per share is growing. Shanthi Gears has been growing its earnings per share at 21% a year over the past five years, indicating strong growth potential.

Overall, while it is positive to see a consistent dividend payment, there are concerns about the sustainability of the current level of payment. With cash flows lacking, it may be challenging for the company to maintain the dividend. Investors should consider a range of factors beyond dividend payments when evaluating the company.

Market movements highlight the value of a consistent dividend policy, but it is essential to conduct a comprehensive analysis before making investment decisions. Simply Wall St has no position in any stocks mentioned and provides commentary based on historical data and analyst forecasts.

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