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

India Glycols Limited (NSE:INDIAGLYCO) has announced that it will pay a dividend of ₹7.50 per share on the 12th of October. This payment means that the dividend yield will be 1.0%, which is around the industry average.

View our latest analysis for India Glycols

India Glycols' Payment Has Solid Earnings Coverage

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, India Glycols' 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 8.8% if recent trends continue. If the dividend continues on this path, the payout ratio could be 16% by next year, which we think can be pretty sustainable going forward.

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 ₹8.00 in 2013, and the most recent fiscal year payment was ₹7.50. The dividend has shrunk at a rate of less than 1% a year over this period. A company that decreases its dividend over time generally isn't what we are looking for.

India Glycols Could Grow Its Dividend

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. India Glycols has impressed us by growing EPS at 8.8% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

Our Thoughts On India Glycols' Dividend

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. This company is not in the top tier of income providing stocks.

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. Case in point: We've spotted 2 warning signs for India Glycols (of which 1 is a bit unpleasant!) you should know about. Is India Glycols not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.