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

Deepak Fertilisers And Petrochemicals Corporation Limited (NSE:DEEPAKFERT) has announced that it will be increasing its dividend from last year's comparable payment on the 9th of October to ₹10.00. Despite this raise, the dividend yield of 0.6% is only a modest boost to shareholder returns.

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Deepak Fertilisers And Petrochemicals' 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, prior to this announcement, Deepak Fertilisers And Petrochemicals' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 50.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 9.9%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Deepak Fertilisers And Petrochemicals

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was ₹4.00, compared to the most recent full-year payment of ₹10.00. This means that it has been growing its distributions at 9.6% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Deepak Fertilisers And Petrochemicals might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Deepak Fertilisers And Petrochemicals has seen EPS rising for the last five years, at 50% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Deepak Fertilisers And Petrochemicals' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 2 warning signs for Deepak Fertilisers And Petrochemicals that investors need to be conscious of moving forward. 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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