Huhtamaki India (NSE:HUHTAMAKI) Will Pay A Smaller Dividend Than Last Year

Huhtamaki India Limited's (NSE:HUHTAMAKI) dividend is being reduced from last year's payment covering the same period to ₹2.00 on the 7th of June. This means the annual payment is 1.0% of the current stock price, which is above the average for the industry.

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Huhtamaki India's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Huhtamaki India was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 71.1% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 13%, which we are pretty comfortable with and we think is feasible on an earnings basis.

See our latest analysis for Huhtamaki India

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was ₹2.80, compared to the most recent full-year payment of ₹2.00. This works out to be a decline of approximately 3.3% per year over that time. 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.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Huhtamaki India has impressed us by growing EPS at 27% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Huhtamaki India's Dividend

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that Huhtamaki India has the makings of a solid income stock moving forward. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for Huhtamaki India you should be aware of, and 1 of them is significant. 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.