Garware Technical Fibres (NSE:GARFIBRES) Is Paying Out A Larger Dividend Than Last Year

Garware Technical Fibres Limited (NSE:GARFIBRES) will increase its dividend from last year's comparable payment on the 13th of October to ₹7.00. 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 Garware Technical Fibres

Garware Technical Fibres' Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, Garware Technical Fibres' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 63.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 5.7%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the annual payment back then was ₹2.50, compared to the most recent full-year payment of ₹7.00. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Garware Technical Fibres has impressed us by growing EPS at 15% per year over the past five years. Garware Technical Fibres definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Garware Technical Fibres' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 3 analysts we track are forecasting for Garware Technical Fibres for free with public analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.