Poly Medicure (NSE:POLYMED) Will Pay A Larger Dividend Than Last Year At ₹3.50

The board of Poly Medicure Limited (NSE:POLYMED) has announced that it will be paying its dividend of ₹3.50 on the 25th of October, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 0.2%, which is below the industry average.

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Poly Medicure's Future Dividend Projections Appear Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Poly Medicure is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. 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.

The next year is set to see EPS grow by 46.8%. If the dividend continues on this path, the payout ratio could be 7.4% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Poly Medicure

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ₹1.25 in 2015, and the most recent fiscal year payment was ₹3.50. This means that it has been growing its distributions at 11% per annum over that time. Poly Medicure has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend 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. It's encouraging to see that Poly Medicure has been growing its earnings per share at 25% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Poly Medicure's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 6 Poly Medicure analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Is Poly Medicure 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.