India Pesticides Limited (NSE:IPL) will pay a dividend of ₹0.75 on the 23rd of September. This payment means the dividend yield will be 0.3%, which is below the average for the industry.
See our latest analysis for India Pesticides
India Pesticides' Dividend Is Well Covered By Earnings
The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, India Pesticides' earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
Looking forward, earnings per share is forecast to rise by 45.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 4.2%, which is in the range that makes us comfortable with the sustainability of the dividend.
India Pesticides Doesn't Have A Long Payment History
The company hasn't been paying a dividend for very long at all, so we can't really make a judgement on how stable the dividend has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. India Pesticides has seen EPS rising for the last five years, at 33% per annum. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
Our Thoughts On India Pesticides' Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about India Pesticides' payments, as there could be some issues with sustaining them into the future. While India Pesticides 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for India Pesticides that investors should know about before committing capital to this stock. Is India Pesticides 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.
About NSEI:IPL
Flawless balance sheet second-rate dividend payer.
