Jindal Poly Films (NSE:JINDALPOLY) Will Pay A Larger Dividend Than Last Year At ₹5.90

The board of Jindal Poly Films Limited (NSE:JINDALPOLY) has announced that it will be paying its dividend of ₹5.90 on the 1st of January, an increased payment from last year's comparable dividend. This takes the dividend yield to 1.0%, which shareholders will be pleased with.

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Jindal Poly Films Might Find It Hard To Continue The Dividend

If the payments aren't sustainable, a high yield for a few years won't matter that much. 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.

Recent, EPS has fallen by 34.4%, so this could continue over the next year. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.

View our latest analysis for Jindal Poly Films

Jindal Poly Films Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was ₹1.00 in 2015, and the most recent fiscal year payment was ₹5.90. This means that it has been growing its distributions at 19% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Jindal Poly Films' EPS has fallen by approximately 34% per year during the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

Our Thoughts On Jindal Poly Films' Dividend

Overall, we always like to see the dividend being raised, but we don't think Jindal Poly Films will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Jindal Poly Films is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Jindal Poly Films you should be aware of, and 1 of them is potentially serious. 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.