Gujarat Apollo Industries (NSE:GUJAPOLLO) Is Paying Out A Dividend Of ₹2.00

The board of Gujarat Apollo Industries Limited (NSE:GUJAPOLLO) has announced that it will pay a dividend on the 28th of October, with investors receiving ₹2.00 per share. The dividend yield will be 1.0% based on this payment which is still above the industry average.

View our latest analysis for Gujarat Apollo Industries

Gujarat Apollo Industries' Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't 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 19.4% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 31%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ₹2.50 in 2012 to the most recent total annual payment of ₹2.00. Doing the maths, this is a decline of about 2.2% per year. A company that decreases its dividend over time generally isn't what we are looking for.

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 19% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Gujarat Apollo Industries' Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Gujarat Apollo Industries' payments, as there could be some issues with sustaining them into the future. While Gujarat Apollo Industries is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 4 warning signs for Gujarat Apollo Industries you should be aware of, and 1 of them makes us a bit uncomfortable. 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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