Gujarat Narmada Valley Fertilizers & Chemicals (NSE:GNFC) Is Increasing Its Dividend To ₹30.00

Gujarat Narmada Valley Fertilizers & Chemicals Limited's (NSE:GNFC) dividend will be increasing from last year's payment of the same period to ₹30.00 on 26th of October. This takes the dividend yield to 5.3%, which shareholders will be pleased with.

View our latest analysis for Gujarat Narmada Valley Fertilizers & Chemicals

Gujarat Narmada Valley Fertilizers & Chemicals' Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Gujarat Narmada Valley Fertilizers & Chemicals was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 4.4% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 54%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ₹3.50 in 2013, and the most recent fiscal year payment was ₹30.00. This works out to be a compound annual growth rate (CAGR) of approximately 24% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings have grown at around 4.4% a year for the past five years, which isn't massive but still better than seeing them shrink. If Gujarat Narmada Valley Fertilizers & Chemicals is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Gujarat Narmada Valley Fertilizers & Chemicals that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.