Thirumalai Chemicals' (NSE:TIRUMALCHM) Dividend Will Be Reduced To ₹1.00

Thirumalai Chemicals Limited (NSE:TIRUMALCHM) has announced that on 23rd of August, it will be paying a dividend of₹1.00, which a reduction from last year's comparable dividend. Based on this payment, the dividend yield will be 0.3%, which is lower than the average for the industry.

Check out our latest analysis for Thirumalai Chemicals

Thirumalai Chemicals' Distributions May Be Difficult To Sustain

If it is predictable over a long period, even low dividend yields can be attractive. Even in the absence of profits, Thirumalai Chemicals is paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

Over the next year, EPS could expand by 2.4% if recent trends continue. This is the right direction to be moving, but it is probably not enough to achieve profitability. Unfortunately, for the dividend to continue at current levels the company definitely needs to get there sooner rather than later.

Thirumalai Chemicals' Dividend Has Lacked Consistency

Thirumalai Chemicals has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2015, the dividend has gone from ₹0.40 total annually to ₹1.00. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings has been rising at 2.4% per annum over the last five years, which admittedly is a bit slow. With EPS growth hard to come by and the company not turning a profit, we wouldn't be particularly optimistic about the growth prospects for Thirumalai Chemicals' dividend in the future.

Thirumalai Chemicals' Dividend Doesn't Look Sustainable

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 payments are bit high to be considered sustainable, and the track record isn't the best. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Thirumalai Chemicals you should be aware of, and 1 of them is a bit concerning. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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