Gulf Oil Lubricants India's (NSE:GULFOILLUB) Dividend Will Be Increased To ₹9.00

The board of Gulf Oil Lubricants India Limited (NSE:GULFOILLUB) has announced that it will be increasing its dividend on the 15th of October to ₹9.00. This makes the dividend yield 2.7%, which is above the industry average.

Check out our latest analysis for Gulf Oil Lubricants India

Gulf Oil Lubricants India's Earnings Easily Cover the Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, prior to this announcement, Gulf Oil Lubricants India's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 13.6% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 38% by next year, which is in a pretty sustainable range.

Gulf Oil Lubricants India Is Still Building Its Track Record

Gulf Oil Lubricants India's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2014, the first annual payment was ₹4.00, compared to the most recent full-year payment of ₹18.00. This works out to be a compound annual growth rate (CAGR) of approximately 24% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Gulf Oil Lubricants India has grown earnings per share at 14% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Gulf Oil Lubricants India's prospects of growing its dividend payments in the future.

Gulf Oil Lubricants India Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 2 warning signs for Gulf Oil Lubricants India that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.
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