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

Premier Polyfilm Ltd. (NSE:PREMIERPOL) has announced that it will be increasing its dividend from last year's comparable payment on the 16th of October to ₹0.75. Although the dividend is now higher, the yield is only 0.3%, which is below the industry average.

View our latest analysis for Premier Polyfilm

Premier Polyfilm's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. However, Premier Polyfilm's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 35.1% over the next 12 months. 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

Looking back, Premier Polyfilm's dividend hasn't been particularly consistent. 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 works out to be a compound annual growth rate (CAGR) of approximately 5.2% a year over that time. 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 see if earnings per share is growing. 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

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Premier Polyfilm that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.