Kuantum Papers (NSE:KUANTUM) Has Affirmed Its Dividend Of ₹3.00

Kuantum Papers Limited (NSE:KUANTUM) has announced that it will pay a dividend of ₹3.00 per share on the 28th of September. This means the annual payment is 2.8% of the current stock price, which is above the average for the industry.

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Kuantum Papers' Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Kuantum Papers' 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.

Looking forward, earnings per share could rise by 9.9% 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.

View our latest analysis for Kuantum Papers

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was ₹0.10, compared to the most recent full-year payment of ₹3.00. This works out to be a compound annual growth rate (CAGR) of approximately 41% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Kuantum Papers 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. We are encouraged to see that Kuantum Papers has grown earnings per share at 9.9% 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.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for Kuantum Papers that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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