Jindal Poly Films' (NSE:JINDALPOLY) Dividend Is Being Reduced To ₹4.30

Jindal Poly Films Limited's (NSE:JINDALPOLY) dividend is being reduced from last year's payment covering the same period to ₹4.30 on the 29th of October. This means that the dividend yield is 0.6%, which is a bit low when comparing to other companies in the industry.

Check out our latest analysis for Jindal Poly Films

Jindal Poly Films' Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, Jindal Poly Films' 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.

EPS is set to fall by 1.6% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 23%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Jindal Poly Films Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the dividend has gone from ₹1.00 total annually to ₹4.30. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth May Be Hard To Achieve

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Although it's important to note that Jindal Poly Films' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

Our Thoughts On Jindal Poly Films' Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 3 warning signs for Jindal Poly Films that you should be aware of before investing. Is Jindal Poly Films 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.