Gujarat Alkalies and Chemicals (NSE:GUJALKALI) Will Pay A Larger Dividend Than Last Year At ₹10.00

Gujarat Alkalies and Chemicals Limited's (NSE:GUJALKALI) dividend will be increasing from last year's payment of the same period to ₹10.00 on 29th of October. This takes the dividend yield to 1.0%, which shareholders will be pleased with.

View our latest analysis for Gujarat Alkalies and Chemicals

Gujarat Alkalies and Chemicals' Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Gujarat Alkalies and Chemicals 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.

Over the next year, EPS could expand by 17.5% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 10%, which is in the range that makes us comfortable with the sustainability of the dividend.

Gujarat Alkalies and Chemicals Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ₹3.00 in 2012 to the most recent total annual payment of ₹10.00. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Gujarat Alkalies and Chemicals has seen EPS rising for the last five years, at 17% per annum. Gujarat Alkalies and Chemicals definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Gujarat Alkalies and Chemicals you should be aware of, and 1 of them is a bit concerning. Is Gujarat Alkalies and Chemicals 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.