Jindal Poly Films (NSE:JINDALPOLY) Is Increasing Its Dividend To ₹5.50

Jindal Poly Films Limited (NSE:JINDALPOLY) has announced that it will be increasing its dividend from last year's comparable payment on the 30th of October to ₹5.50. The payment will take the dividend yield to 0.7%, which is in line with the average for the industry.

View our latest analysis for Jindal Poly Films

Jindal Poly Films' Payment Could Potentially Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, Jindal Poly Films was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share could rise by 1.5% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.

Jindal Poly Films Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ₹1.00 in 2014 to the most recent total annual payment of ₹5.50. This means that it has been growing its distributions at 19% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. However, Jindal Poly Films' EPS was effectively flat over the past five years, which could stop the company from paying more every year. If Jindal Poly Films is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Jindal Poly Films' payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Jindal Poly Films is a great stock to add to your portfolio if income is your focus.

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.