Gujarat Apollo Industries (NSE:GUJAPOLLO) Has Announced A Dividend Of ₹2.00

Gujarat Apollo Industries Limited's (NSE:GUJAPOLLO) investors are due to receive a payment of ₹2.00 per share on 30th of October. This payment means that the dividend yield will be 0.8%, which is around the industry average.

See our latest analysis for Gujarat Apollo Industries

Gujarat Apollo Industries' Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Gujarat Apollo Industries' earnings easily covered the dividend, but free cash flows were negative. 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.

EPS is set to fall by 13.2% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 17%, which is definitely feasible to continue.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ₹2.50 in 2013, and the most recent fiscal year payment was ₹2.00. This works out to be a decline of approximately 2.2% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

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. Gujarat Apollo Industries' EPS has fallen by approximately 13% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Gujarat Apollo Industries' Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Just as an example, we've come across 3 warning signs for Gujarat Apollo Industries you should be aware of, and 1 of them is potentially serious. Is Gujarat Apollo Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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