TCPL Packaging (NSE:TCPLPACK) Will Pay A Larger Dividend Than Last Year At ₹20.00

TCPL Packaging Limited (NSE:TCPLPACK) will increase its dividend from last year's comparable payment on the 3rd of September to ₹20.00. This will take the annual payment to 1.2% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for TCPL Packaging

TCPL Packaging's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, TCPL Packaging's dividend was only 16% of earnings, however it was paying out 117% of free cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share could rise by 40.0% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 13% by next year, which we think can be pretty 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 dividend has gone from ₹2.65 total annually to ₹20.00. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. 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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. TCPL Packaging has impressed us by growing EPS at 40% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On TCPL Packaging's Dividend

Overall, we always like to see the dividend being raised, but we don't think TCPL Packaging will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for TCPL Packaging that investors should take into consideration. 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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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.