UPL (NSE:UPL) Will Pay A Smaller Dividend Than Last Year

UPL Limited (NSE:UPL) has announced that on 26th of September, it will be paying a dividend of₹1.00, which a reduction from last year's comparable dividend. This means that the dividend yield is 0.2%, which is a bit low when comparing to other companies in the industry.

Check out our latest analysis for UPL

UPL's Dividend Is Well Covered By Earnings

If it is predictable over a long period, even low dividend yields can be attractive. Even in the absence of profits, UPL is paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Analysts expect a massive rise in earnings per share in the next year. If the dividend extends its recent trend, estimates say the dividend could reach 1.8%, which we would be comfortable to see continuing.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ₹2.67 in 2014 to the most recent total annual payment of ₹1.00. This works out to be a decline of approximately 9.3% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

UPL May Find It Hard To Grow The Dividend

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. However, UPL has only grown its earnings per share at 2.4% per annum over the past five years. With no profits, we don't think UPL has much potential to grow the dividend in the future.

UPL's 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. We don't think UPL is a great stock to add to your portfolio if income is your focus.

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. For example, we've picked out 1 warning sign for UPL that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com