Manali Petrochemicals (NSE:MANALIPETC) Has Announced That Its Dividend Will Be Reduced To ₹0.75

Manali Petrochemicals Limited (NSE:MANALIPETC) is reducing its dividend from last year's comparable payment to ₹0.75 on the 25th of October. The dividend yield of 1.1% is still a nice boost to shareholder returns, despite the cut.

View our latest analysis for Manali Petrochemicals

Manali Petrochemicals Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, Manali Petrochemicals' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, EPS could fall by 20.4% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, the payout ratio in 12 months could be 100%, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was ₹0.50, compared to the most recent full-year payment of ₹0.75. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% a year over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Has Limited Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 20% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. As an example, we've identified 2 warning signs for Manali Petrochemicals that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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