India Glycols (NSE:INDIAGLYCO) Has Announced A Dividend Of ₹7.50

The board of India Glycols Limited (NSE:INDIAGLYCO) has announced that it will pay a dividend on the 12th of October, with investors receiving ₹7.50 per share. Based on this payment, the dividend yield on the company's stock will be 1.1%, which is an attractive boost to shareholder returns.

Check out our latest analysis for India Glycols

India Glycols' Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. India Glycols is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

If the trend of the last few years continues, EPS will grow by 8.8% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 16% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from ₹8.00 total annually to ₹7.50. Payments have been decreasing at a very slow pace in this time period. 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.

India Glycols Could Grow Its Dividend

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. We are encouraged to see that India Glycols has grown earnings per share at 8.8% per year over the past five years. India Glycols definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about India Glycols' payments, as there could be some issues with sustaining them into the future. While India Glycols is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for India Glycols (1 is a bit unpleasant!) that you should be aware of before investing. Is India Glycols 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.