Godawari Power & Ispat (NSE:GPIL) Is Increasing Its Dividend To ₹5.00

Godawari Power & Ispat Limited's (NSE:GPIL) dividend will be increasing from last year's payment of the same period to ₹5.00 on 1st of January. This takes the annual payment to 0.4% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Godawari Power & Ispat

Godawari Power & Ispat's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Godawari Power & Ispat was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 101.8% over the next year. If the dividend continues on this path, the payout ratio could be 4.0% by next year, which we think can be pretty sustainable going forward.

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 ₹0.75 in 2014, and the most recent fiscal year payment was ₹5.00. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Godawari Power & Ispat has grown earnings per share at 32% per year over the past five years. 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 Godawari Power & Ispat's Dividend

Overall, a dividend increase is always good, and we think that Godawari Power & Ispat is a strong income stock thanks to its track record and growing earnings. 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.

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. For instance, we've picked out 1 warning sign for Godawari Power & Ispat that investors should take into consideration. Is Godawari Power & Ispat not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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