AGI Greenpac (NSE:AGI) Has Announced That It Will Be Increasing Its Dividend To ₹5.00

AGI Greenpac Limited's (NSE:AGI) dividend will be increasing from last year's payment of the same period to ₹5.00 on 29th of September. This takes the dividend yield to 1.8%, which shareholders will be pleased with.

Check out our latest analysis for AGI Greenpac

AGI Greenpac's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, AGI Greenpac's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS could expand by 12.8% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 18%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the dividend has gone from ₹2.50 total annually to ₹5.00. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

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. We are encouraged to see that AGI Greenpac has grown earnings per share at 13% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On AGI Greenpac's Dividend

In summary, while it's always good to see the dividend being raised, we don't think AGI Greenpac's payments are rock solid. While AGI Greenpac is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

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 AGI Greenpac that investors should take into consideration. Is AGI Greenpac not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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