GHCL Textiles (NSE:GHCLTEXTIL) Is Due To Pay A Dividend Of ₹0.50

GHCL Textiles Limited's (NSE:GHCLTEXTIL) investors are due to receive a payment of ₹0.50 per share on 20th of August. This makes the dividend yield 0.5%, which will augment investor returns quite nicely.

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GHCL Textiles' Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, GHCL Textiles' dividend was only 8.5% of earnings, however it was paying out 120% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

If the trend of the last few years continues, EPS will grow by 60.9% over the next 12 months. If the dividend continues on this path, the payout ratio could be 5.3% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for GHCL Textiles

GHCL Textiles Doesn't Have A Long Payment History

It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. GHCL Textiles has impressed us by growing EPS at 61% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about GHCL Textiles' payments, as there could be some issues with sustaining them into the future. While GHCL Textiles 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for GHCL Textiles that investors should know about before committing capital to this stock. Is GHCL Textiles not quite the opportunity you were looking for? Why not check out our selection of top 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.