TCPL Packaging (NSE:TCPLPACK) Is Increasing Its Dividend To ₹22.00

The board of TCPL Packaging Limited (NSE:TCPLPACK) has announced that it will be increasing its dividend by 10% on the 29th of August to ₹22.00, up from last year's comparable payment of ₹20.00. Based on this payment, the dividend yield for the company will be 0.9%, which is fairly typical for the industry.

View our latest analysis for TCPL Packaging

TCPL Packaging's Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, TCPL Packaging's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 28.3% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 17%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was ₹2.50, compared to the most recent full-year payment of ₹20.00. This works out to be a compound annual growth rate (CAGR) of approximately 23% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. TCPL Packaging has impressed us by growing EPS at 28% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like TCPL Packaging's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for TCPL Packaging that investors should know about before committing capital to this stock. Is TCPL Packaging not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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