Apollo Pipes' (NSE:APOLLOPIPE) Upcoming Dividend Will Be Larger Than Last Year's

Apollo Pipes Limited (NSE:APOLLOPIPE) will increase its dividend from last year's comparable payment on the 25th of October to ₹1.00. This takes the annual payment to 0.2% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for Apollo Pipes

Apollo Pipes' Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, Apollo Pipes' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 165.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 4.3%, which is in the range that makes us comfortable with the sustainability of the dividend.

Apollo Pipes' Dividend Has Lacked Consistency

Looking back, Apollo Pipes' dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The annual payment during the last 5 years was ₹0.333 in 2019, and the most recent fiscal year payment was ₹1.00. This means that it has been growing its distributions at 25% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Apollo Pipes Could Grow Its Dividend

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. Apollo Pipes has seen EPS rising for the last five years, at 7.6% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. Taking the debate a bit further, we've identified 1 warning sign for Apollo Pipes 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.