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Could Control Print Limited (NSE:CONTROLPR) be an attractive dividend share to own for the long haul? Investors are often drawn to strong companies with the idea of reinvesting the dividends. On the other hand, investors have been known to buy a stock because of its yield, and then lose money if the company's dividend doesn't live up to expectations.
Investors might not know much about Control Print's dividend prospects, even though it has been paying dividends for the last seven years and offers a 2.7% yield. A 2.7% yield is not inspiring, but the longer payment history has some appeal. Some simple research can reduce the risk of buying Control Print for its dividend - read on to learn more.
Explore this interactive chart for our latest analysis on Control Print!
Payout ratios
Companies (usually) pay dividends out of their earnings. If a company is paying more than it earns, the dividend might have to be cut. So we need to form a view on if a company's dividend is sustainable, relative to its net profit after tax. In the last year, Control Print paid out 37% of its profit as dividends. A medium payout ratio strikes a good balance between paying dividends, and keeping enough back to invest in the business. One of the risks is that management reinvests the retained capital poorly instead of paying a higher dividend.
In addition to comparing dividends against profits, we should inspect whether the company generated enough cash to pay its dividend. Control Print paid out a conservative 50% of its free cash flow as dividends 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.
With a strong net cash balance, Control Print investors may not have much to worry about in the near term from a dividend perspective.
We update our data on Control Print every 24 hours, so you can always get our latest analysis of its financial health, here.
Dividend Volatility
Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. Control Print has been paying a dividend for the past seven years. The dividend has been quite stable over the past seven years, which is great to see - although we usually like to see the dividend maintained for a decade before giving it full marks, though. During the past seven-year period, the first annual payment was ₹1.33 in 2012, compared to ₹6.50 last year. This works out to be a compound annual growth rate (CAGR) of approximately 25% a year over that time.