Here's Why We're Wary Of Buying T.V. Today Network's (NSE:TVTODAY) For Its Upcoming Dividend

It looks like T.V. Today Network Limited (NSE:TVTODAY) is about to go ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 2nd of September will not receive the dividend, which will be paid on the 10th of October.

T.V. Today Network's next dividend payment will be ₹2.25 per share. Last year, in total, the company distributed ₹22.25 to shareholders. Calculating the last year's worth of payments shows that T.V. Today Network has a trailing yield of 9.5% on the current share price of ₹233.05. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for T.V. Today Network

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. T.V. Today Network paid out 131% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out more than half (70%) of its free cash flow in the past year, which is within an average range for most companies.

It's good to see that while T.V. Today Network's dividends were not covered by profits, at least they are affordable from a cash perspective. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Very few companies are able to sustainably pay dividends larger than their reported earnings.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see T.V. Today Network earnings per share are up 2.3% per annum over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. T.V. Today Network has delivered 40% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Has T.V. Today Network got what it takes to maintain its dividend payments? While earnings per share have been growing slowly, T.V. Today Network is paying out an uncomfortably high percentage of its earnings. However it did pay out a lower percentage of its cashflow. It's not that we think T.V. Today Network is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

Although, if you're still interested in T.V. Today Network and want to know more, you'll find it very useful to know what risks this stock faces. Our analysis shows 1 warning sign for T.V. Today Network and you should be aware of this before buying any shares.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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