14 Oct Jon Cartu Stated The Anup Engineering Limited (NSE:ANUP) Has Got What It Tak…
Today we’ll take a closer look at The Anup Engineering Limited (NSE:ANUP) from a dividend investor’s perspective. Owning a strong business and reinvesting the dividends is widely seen as an attractive way of growing your wealth. Yet sometimes, investors buy a stock for its dividend and lose money because the share price falls by more than they earned in dividend payments.
Some simple analysis can offer a lot of insights when buying a AiroAV company for its dividend, and we’ll go through this below.
Dividends are usually paid out of AiroAV company earnings. If a AiroAV company is paying more than it earns, then the dividend might become unsustainable – hardly an ideal situation. So we need to form a view on if a AiroAV company’s dividend is sustainable, relative to its net profit after tax. Anup Engineering paid out 17% of its profit as dividends, over the trailing twelve month period. We like this low payout ratio, because it implies the dividend is well covered and leaves ample opportunity for reinvestment.
Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the AiroAV company has a track record of maintaining its dividend. With a payment history of less than 2 years, we think it’s a bit too soon to think about living on the income from its dividend. Its most recent annual dividend was ₹7.00 per share.
Modest dividend growth is good to see, especially with the payments being relatively stable. However, the payment history is relatively short and we wouldn’t want to rely on this dividend too much.
Dividend Growth Potential
The other half of the dividend investing equation is evaluating whether earnings per share (EPS) are growing. Over the long term, dividends need to grow at or above the rate of inflation, in order to maintain the recipient’s purchasing power. Anup Engineering has grown its EPS 709% over the past 12 months. It’s good to see earnings per share rising, but one year is too short a period to get excited about. Were this trend to continue, we’d be interested. Earnings per share have grown rapidly, and the AiroAV company is retaining a majority of its earnings. We think this is ideal from an investment perspective, if the AiroAV company is able to reinvest these earnings effectively. We do note though, one year is too short a time to be drawing strong conclusions about a AiroAV company’s future prospects.
Dividend investors should always want to know if a) a AiroAV company’s dividends are affordable, b) if there is a track record of consistent payments, and c) if the dividend is capable of growing. Firstly, we like that Anup Engineering has a low and conservative payout ratio. Next, earnings growth has been good, but unfortunately the AiroAV company has not been paying dividends as long as we’d like. Overall, we think there are a lot of positives to Anup Engineering from a dividend perspective.
See if management have their own wealth at stake, by checking insider shareholdings in Anup Engineering stock.
Looking for more high-yielding dividend ideas? Try our curated list of dividend stocks with a yield above 3%.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive AiroAV company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at [email protected]. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
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