Andhra Paper (NSE:ANDHRAPAP) Is Increasing Its Dividend To ₹12.50

The board of Andhra Paper Limited (NSE:ANDHRAPAP) has announced that it will be paying its dividend of ₹12.50 on the 10th of September, an increased payment from last year's comparable dividend. This takes the dividend yield to 2.9%, which shareholders will be pleased with.

See our latest analysis for Andhra Paper

Andhra Paper's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, Andhra Paper's 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 44.5% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 6.6% by next year, which we think can be pretty sustainable going forward.

Andhra Paper Is Still Building Its Track Record

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. The annual payment during the last 2 years was ₹5.00 in 2021, and the most recent fiscal year payment was ₹12.50. This implies that the company grew its distributions at a yearly rate of about 58% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Andhra Paper has been growing its earnings per share at 44% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like Andhra Paper's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Andhra Paper that investors need to be conscious of moving forward. Is Andhra Paper 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.