Deepak Fertilisers And Petrochemicals (NSE:DEEPAKFERT) Is Increasing Its Dividend To ₹10.00

Deepak Fertilisers And Petrochemicals Corporation Limited (NSE:DEEPAKFERT) will increase its dividend from last year's comparable payment on the 1st of October to ₹10.00. This takes the dividend yield to 1.8%, which shareholders will be pleased with.

Check out our latest analysis for Deepak Fertilisers And Petrochemicals

Deepak Fertilisers And Petrochemicals' Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Deepak Fertilisers And Petrochemicals is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. 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 is forecast to fall by 14.0%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 17%, which is comfortable for the company to continue in the future.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the annual payment back then was ₹5.50, compared to the most recent full-year payment of ₹10.00. This means that it has been growing its distributions at 6.2% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Deepak Fertilisers And Petrochemicals has been growing its earnings per share at 47% a year over the past three 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.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 4 warning signs for Deepak Fertilisers And Petrochemicals you should be aware of, and 2 of them shouldn't be ignored. Is Deepak Fertilisers And Petrochemicals 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.