Tube Investments of India's (NSE:TIINDIA) Dividend Will Be ₹2.00

The board of Tube Investments of India Limited (NSE:TIINDIA) has announced that it will pay a dividend on the 4th of March, with investors receiving ₹2.00 per share. Including this payment, the dividend yield on the stock will be 0.2%, which is a modest boost for shareholders' returns.

See our latest analysis for Tube Investments of India

Tube Investments of India's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Tube Investments of India's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share is forecast to rise by 27.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 7.6%, which is in the range that makes us comfortable with the sustainability of the dividend.

Tube Investments of India's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2018, the first annual payment was ₹2.50, compared to the most recent full-year payment of ₹4.00. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Tube Investments of India has grown earnings per share at 34% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Our Thoughts On Tube Investments of India's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Tube Investments of India is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 3 analysts we track are forecasting for Tube Investments of India for free with public analyst estimates for the company. We have also put together a list of global stocks with a solid dividend.

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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.