Premier Polyfilm (NSE:PREMIERPOL) Is Paying Out A 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 0.4%, which is fairly typical for the industry.

See our latest analysis for Premier Polyfilm

Premier Polyfilm's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, Premier Polyfilm's earnings easily covered the dividend, but free cash flows were negative. 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.

Over the next year, EPS could expand by 20.0% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 7.5% 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. This makes us cautious about the consistency of the dividend over a full economic cycle. The payments haven't really changed that much since 7 years ago. 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Premier Polyfilm has seen EPS rising for the last five years, at 20% per annum. Premier Polyfilm definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Premier Polyfilm's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Premier Polyfilm is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for Premier Polyfilm you should be aware of, and 1 of them doesn't sit too well with us. 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.