Greenply Industries (NSE:GREENPLY) Has Announced That It Will Be Increasing Its Dividend To ₹0.50

Greenply Industries Limited's (NSE:GREENPLY) dividend will be increasing from last year's payment of the same period to ₹0.50 on 21st of October. Although the dividend is now higher, the yield is only 0.3%, which is below the industry average.

View our latest analysis for Greenply Industries

Greenply Industries' Earnings Easily Cover the Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Greenply Industries is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Looking forward, earnings per share is forecast to rise by 121.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 2.7%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ₹0.40 in 2012, and the most recent fiscal year payment was ₹0.50. This implies that the company grew its distributions at a yearly rate of about 2.3% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Greenply Industries' EPS has declined at around 5.6% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think Greenply Industries' payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Greenply Industries is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Greenply Industries (of which 1 is a bit unpleasant!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.