Galaxy Surfactants (NSE:GALAXYSURF) Is Reducing Its Dividend To ₹4.00

Galaxy Surfactants Limited (NSE:GALAXYSURF) is reducing its dividend from last year's comparable payment to ₹4.00 on the 9th of September. The dividend yield will be in the average range for the industry at 0.8%.

See our latest analysis for Galaxy Surfactants

Galaxy Surfactants' Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Before making this announcement, Galaxy Surfactants was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 1.6% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 24%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Galaxy Surfactants' Dividend Has Lacked Consistency

Galaxy Surfactants has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from an annual total of ₹7.00 in 2018 to the most recent total annual payment of ₹22.00. This works out to be a compound annual growth rate (CAGR) of approximately 26% a year over that time. Galaxy Surfactants 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

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Galaxy Surfactants has impressed us by growing EPS at 19% 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.

We Really Like Galaxy Surfactants' Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Galaxy Surfactants does. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Galaxy Surfactants that investors need to be conscious of moving forward. Is Galaxy Surfactants 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.