Polyplex (NSE:POLYPLEX) Will Pay A Dividend Of ₹4.50

Polyplex Corporation Limited (NSE:POLYPLEX) has announced that it will pay a dividend of ₹4.50 per share on the 15th of October. This makes the dividend yield 1.3%, which is above the industry average.

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Polyplex's Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Polyplex was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

EPS is set to fall by 18.2% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 41%, which we are pretty comfortable with and we think is feasible on an earnings basis.

See our latest analysis for Polyplex

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 ₹2.00, compared to the most recent full-year payment of ₹13.50. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Has Limited Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Polyplex's EPS has declined at around 18% a year. 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.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Polyplex (1 makes us a bit uncomfortable!) that you should be aware of before investing. Is Polyplex 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.