Seshasayee Paper and Boards (NSE:SESHAPAPER) Has Re-Affirmed Its Dividend Of ₹2.50

The board of Seshasayee Paper and Boards Limited (NSE:SESHAPAPER) has announced that it will pay a dividend on the 22nd of August, with investors receiving ₹2.50 per share. This makes the dividend yield 1.3%, which will augment investor returns quite nicely.

View our latest analysis for Seshasayee Paper and Boards

Seshasayee Paper and Boards' Earnings Easily Cover the Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, Seshasayee Paper and Boards' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 2.7% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 14%, which is definitely feasible to continue.

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. Since 2012, the first annual payment was ₹1.00, compared to the most recent full-year payment of ₹2.50. This implies that the company grew its distributions at a yearly rate of about 9.6% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Seshasayee Paper and Boards 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. It's not great to see that Seshasayee Paper and Boards' earnings per share has fallen at approximately 2.7% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On Seshasayee Paper and Boards' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

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 4 warning signs for Seshasayee Paper and Boards (1 is potentially serious!) 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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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.