Gujarat Pipavav Port (NSE:GPPL) Is Paying Out A Larger Dividend Than Last Year

Gujarat Pipavav Port Limited (NSE:GPPL) will increase its dividend from last year's comparable payment on the 3rd of December to ₹4.00. This will take the annual payment to 4.0% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Gujarat Pipavav Port

Gujarat Pipavav Port's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite comfortably covered by Gujarat Pipavav Port's earnings, but it was a bit tighter on the cash flow front. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Over the next year, EPS is forecast to expand by 59.6%. If the dividend continues on this path, the payout ratio could be 68% by next year, which we think can be pretty sustainable going forward.

Gujarat Pipavav Port's Dividend Has Lacked Consistency

Looking back, Gujarat Pipavav Port's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2016, the dividend has gone from ₹1.90 total annually to ₹7.40. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Gujarat Pipavav Port Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Gujarat Pipavav Port has impressed us by growing EPS at 8.0% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

Our Thoughts On Gujarat Pipavav Port's Dividend

Overall, we always like to see the dividend being raised, but we don't think Gujarat Pipavav Port will make a great income stock. While Gujarat Pipavav Port is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Gujarat Pipavav Port that you should be aware of before investing. 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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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.