TCPL Packaging (NSE:TCPLPACK) Could Be A Buy For Its Upcoming Dividend
Readers hoping to buy TCPL Packaging Limited (NSE:TCPLPACK) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase TCPL Packaging's shares before the 4th of August to receive the dividend, which will be paid on the 10th of September.
The company's next dividend payment will be ₹25.00 per share, on the back of last year when the company paid a total of ₹25.00 to shareholders. Based on the last year's worth of payments, TCPL Packaging stock has a trailing yield of around 0.8% on the current share price of ₹3183.10. If you buy this business for its dividend, you should have an idea of whether TCPL Packaging's dividend is reliable and sustainable. As a result, readers should always check whether TCPL Packaging has been able to grow its dividends, or if the dividend might be cut.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. TCPL Packaging paid out just 23% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Luckily it paid out just 22% of its free cash flow last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
View our latest analysis for TCPL Packaging
Click here to see how much of its profit TCPL Packaging paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see TCPL Packaging's earnings have been skyrocketing, up 24% per annum for the past five years. TCPL Packaging earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. TCPL Packaging has delivered 15% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Is TCPL Packaging worth buying for its dividend? It's great that TCPL Packaging is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. It's a promising combination that should mark this company worthy of closer attention.
In light of that, while TCPL Packaging has an appealing dividend, it's worth knowing the risks involved with this stock. Our analysis shows 3 warning signs for TCPL Packaging and you should be aware of these before buying any shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full 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.