Premier Polyfilm (NSE:PREMIERPOL) Has Announced That It Will Be Increasing Its Dividend To ₹0.75

Premier Polyfilm Ltd.'s (NSE:PREMIERPOL) dividend will be increasing from last year's payment of the same period to ₹0.75 on 16th of October. Even though the dividend went up, the yield is still quite low at only 0.3%.

View our latest analysis for Premier Polyfilm

Premier Polyfilm's Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, Premier Polyfilm's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 35.1% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 5.5% by next year, which is in a pretty sustainable range.

Premier Polyfilm's Dividend Has Lacked Consistency

It's comforting to see that Premier Polyfilm has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2016, the annual payment back then was ₹0.50, compared to the most recent full-year payment of ₹0.75. This implies that the company grew its distributions at a yearly rate of about 5.2% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

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. Premier Polyfilm has impressed us by growing EPS at 35% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Premier Polyfilm Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Premier Polyfilm is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Premier Polyfilm that investors should take into consideration. Is Premier Polyfilm 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.

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