Time Technoplast Limited's (NSE:TIMETECHNO) dividend is being reduced to ₹0.70 on the 29th of October. The dividend yield will be in the average range for the industry at 1.0%.
Time Technoplast's Dividend Is Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn't mean too much. However, Time Technoplast's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 49.4% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 8.0% by next year, which is in a pretty sustainable range.
The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2011, the first annual payment was ₹0.40, compared to the most recent full-year payment of ₹0.70. This implies that the company grew its distributions at a yearly rate of about 5.8% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Time Technoplast might have put its house in order since then, but we remain cautious.
Dividend Growth May Be Hard To Achieve
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Although it's important to note that Time Technoplast's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. If Time Technoplast is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.
Our Thoughts On Time Technoplast's Dividend
Even though the dividend was cut this year, we think Time Technoplast has the ability to make consistent payments in the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.
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 identified 3 warning signs for Time Technoplast (1 is significant!) that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.
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