Gujarat Ambuja Exports (NSE:GAEL) Is Reducing Its Dividend To ₹0.25

Gujarat Ambuja Exports Limited (NSE:GAEL) has announced that on 29th of September, it will be paying a dividend of₹0.25, which a reduction from last year's comparable dividend. This means that the annual payment is 0.2% of the current stock price, which is lower than what the rest of the industry is paying.

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Gujarat Ambuja Exports' Projected Earnings Seem Likely To Cover Future Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. However, Gujarat Ambuja Exports' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share could rise by 8.2% 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 4.7% by next year, which is in a pretty sustainable range.

View our latest analysis for Gujarat Ambuja Exports

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ₹0.175 in 2015 to the most recent total annual payment of ₹0.25. This means that it has been growing its distributions at 3.6% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Gujarat Ambuja Exports Could Grow Its Dividend

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. We are encouraged to see that Gujarat Ambuja Exports has grown earnings per share at 8.2% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Gujarat Ambuja Exports' prospects of growing its dividend payments in the future.

We Really Like Gujarat Ambuja Exports' Dividend

Overall, we think that Gujarat Ambuja Exports could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Gujarat Ambuja Exports that investors should know about before committing capital to this stock. 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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