West Coast Paper Mills (NSE:WSTCSTPAPR) Will Pay A Smaller Dividend Than Last Year

West Coast Paper Mills Limited's (NSE:WSTCSTPAPR) dividend is being reduced from last year's payment covering the same period to ₹8.00 on the 13th of September. This means the annual payment is 1.3% of the current stock price, which is above the average for the industry.

Check out our latest analysis for West Coast Paper Mills

West Coast Paper Mills' Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, West Coast Paper Mills' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 18.5% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 7.5% by next year, which is in a pretty sustainable range.

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 ₹1.00 in 2014 to the most recent total annual payment of ₹8.00. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. West Coast Paper Mills has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. West Coast Paper Mills has impressed us by growing EPS at 19% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like West Coast Paper Mills' Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like West Coast Paper Mills does. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for West Coast Paper Mills that investors should take into consideration. Is West Coast Paper Mills not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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

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