Manali Petrochemicals' (NSE:MANALIPETC) Dividend Is Being Reduced To ₹0.50

Manali Petrochemicals Limited (NSE:MANALIPETC) is reducing its dividend from last year's comparable payment to ₹0.50 on the 16th of October. Despite the cut, the dividend yield of 0.8% will still be comparable to other companies in the industry.

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Manali Petrochemicals' Future Dividend Projections Appear Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Manali Petrochemicals' earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Unless the company can turn things around, EPS could fall by 3.2% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 31%, which is definitely feasible to continue.

See our latest analysis for Manali Petrochemicals

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The payments haven't really changed that much since 10 years ago. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, Manali Petrochemicals' earnings per share has shrunk at approximately 3.2% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

Manali Petrochemicals' Dividend Doesn't Look Sustainable

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. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Manali Petrochemicals (of which 1 is a bit unpleasant!) you should know about. Is Manali Petrochemicals not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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