Gulshan Polyols (NSE:GULPOLY) Is Paying Out A Dividend Of ₹0.30

The board of Gulshan Polyols Limited (NSE:GULPOLY) has announced that it will pay a dividend on the 18th of October, with investors receiving ₹0.30 per share. The dividend yield is 0.2% based on this payment, which is a little bit low compared to the other companies in the industry.

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Gulshan Polyols' Future Dividend Projections Appear Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Gulshan Polyols' earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS could expand by 6.6% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 6.4%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Gulshan Polyols

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ₹0.583 in 2015, and the most recent fiscal year payment was ₹0.30. Doing the maths, this is a decline of about 6.4% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Gulshan Polyols Could Grow Its Dividend

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. It's encouraging to see that Gulshan Polyols has been growing its earnings per share at 6.6% a year over the past five years. Gulshan Polyols definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

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. For instance, we've picked out 2 warning signs for Gulshan Polyols that investors should take into consideration. Is Gulshan Polyols 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.