Nahar Poly Films (NSE:NAHARPOLY) Has Announced That Its Dividend Will Be Reduced To ₹1.00

Nahar Poly Films Limited's (NSE:NAHARPOLY) dividend is being reduced from last year's payment covering the same period to ₹1.00 on the 12th of October. This means that the annual payment is 0.3% of the current stock price, which is lower than what the rest of the industry is paying.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Nahar Poly Films' stock price has increased by 73% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Nahar Poly Films

Nahar Poly Films' Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, Nahar Poly Films was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, EPS could fall by 2.0% if the company can't turn things around from the last few years. Assuming the dividend continues along recent trends, we believe the payout ratio could be 18%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Nahar Poly Films' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 8 years was ₹0.50 in 2016, and the most recent fiscal year payment was ₹1.00. This works out to be a compound annual growth rate (CAGR) of approximately 9.1% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Nahar Poly Films May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Nahar Poly Films' EPS was effectively flat over the past five years, which could stop the company from paying more every year.

Our Thoughts On Nahar Poly Films' Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. To that end, Nahar Poly Films has 4 warning signs (and 2 which are a bit unpleasant) we think you should know about. Is Nahar 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.