Gujarat Alkalies and Chemicals (NSE:GUJALKALI) Will Pay A Larger Dividend Than Last Year At ₹15.80

Gujarat Alkalies and Chemicals Limited (NSE:GUJALKALI) has announced that it will be increasing its dividend from last year's comparable payment on the 26th of October to ₹15.80. This will take the annual payment to 2.6% of the stock price, which is above what most companies in the industry pay.

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Gujarat Alkalies and Chemicals Might Find It Hard To Continue The Dividend

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Gujarat Alkalies and Chemicals isn't generating any profits, and it is paying out a very high proportion of the cash it is earning. This is quite a strong warning sign that the dividend may not be sustainable.

Over the next year, EPS might fall by 36.5% based on recent performance. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.

Check out our latest analysis for Gujarat Alkalies and Chemicals

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 ₹4.50 in 2015, and the most recent fiscal year payment was ₹15.80. This works out to be a compound annual growth rate (CAGR) of approximately 13% 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.

Dividend Growth Potential Is Shaky

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. Earnings per share has been sinking by 37% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

We're Not Big Fans Of Gujarat Alkalies and Chemicals' Dividend

In conclusion, we have some concerns about this dividend, even though it being raised is good. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, the dividend is not reliable enough to make this a good income 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. For instance, we've picked out 2 warning signs for Gujarat Alkalies and Chemicals that investors should take into consideration. 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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