Premier Polyfilm (NSE:PREMIERPOL) Has Affirmed Its Dividend Of ₹0.50

Premier Polyfilm Ltd.'s (NSE:PREMIERPOL) investors are due to receive a payment of ₹0.50 per share on 18th of October. Based on this payment, the dividend yield will be 0.5%, which is fairly typical for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Premier Polyfilm's stock price has increased by 35% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for Premier Polyfilm

Premier Polyfilm's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Premier Polyfilm was earning enough to cover the dividend, but free cash flows weren't positive. 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.

Looking forward, earnings per share could rise by 20.0% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 7.5% by next year, which we think can be pretty sustainable going forward.

Premier Polyfilm's Dividend Has Lacked Consistency

Looking back, Premier Polyfilm's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. There hasn't been much of a change in the dividend over the last 7 years. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Premier Polyfilm has seen EPS rising for the last five years, at 20% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

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

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Premier Polyfilm has 3 warning signs (and 1 which is concerning) we think you should know about. 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.