Time Technoplast (NSE:TIMETECHNO) Has Announced That Its Dividend Will Be Reduced To ₹0.70

Time Technoplast Limited's (NSE:TIMETECHNO) dividend is being reduced to ₹0.70 on the 29th of October. This means that the dividend yield is 0.9%, which is a bit low when comparing to other companies in the industry.

See our latest analysis for Time Technoplast

Time Technoplast's Earnings Easily Cover the Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Time Technoplast's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 93.7% over the next year. If the dividend continues on this path, the payout ratio could be 8.6% by next year, which we think can be pretty sustainable going forward.

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. The dividend has gone from ₹0.40 in 2011 to the most recent annual payment of ₹0.70. This implies that the company grew its distributions at a yearly rate of about 5.8% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Time Technoplast May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. In the last five years, Time Technoplast's earnings per share has shrunk at approximately 4.1% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Our Thoughts On Time Technoplast's Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Time Technoplast (of which 1 is a bit concerning!) you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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