Gujarat Pipavav Port (NSE:GPPL) Has Announced A Dividend Of ₹2.40

Gujarat Pipavav Port Limited's (NSE:GPPL) investors are due to receive a payment of ₹2.40 per share on 2nd of September. The dividend yield will be 5.1% based on this payment which is still above the industry average.

Check out our latest analysis for Gujarat Pipavav Port

Gujarat Pipavav Port's Earnings Easily Cover the Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Gujarat Pipavav Port's profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

The next year is set to see EPS grow by 65.4%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 64% which brings it into quite a comfortable range.

Gujarat Pipavav Port's Dividend Has Lacked Consistency

Looking back, Gujarat Pipavav Port's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 6 years was ₹1.90 in 2016, and the most recent fiscal year payment was ₹4.00. This means that it has been growing its distributions at 13% per annum 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.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Gujarat Pipavav Port has seen earnings per share falling at 6.9% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Gujarat Pipavav Port's Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Gujarat Pipavav Port that investors should know about before committing capital to this stock. Is Gujarat Pipavav Port not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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