Can Fin Homes' (NSE:CANFINHOME) Shareholders Will Receive A Smaller Dividend Than Last Year

Can Fin Homes Limited (NSE:CANFINHOME) is reducing its dividend from last year's comparable payment to ₹1.50 on the 7th of October. This means that the dividend yield is 0.6%, which is a bit low when comparing to other companies in the industry.

View our latest analysis for Can Fin Homes

Can Fin Homes' Dividend Forecasted To Be Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Can Fin Homes has a long history of paying out dividends, with its current track record at a minimum of 10 years. While past data isn't a guarantee for the future, Can Fin Homes' latest earnings report puts its payout ratio at 7.6%, showing that the company can pay out its dividends comfortably.

Over the next year, EPS could expand by 15.3% if recent trends continue. Assuming the dividend continues along recent trends, we think the future payout ratio could be 6.9% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ₹0.50 in 2012 to the most recent total annual payment of ₹3.00. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. Can Fin Homes has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Can Fin Homes has impressed us by growing EPS at 15% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Can Fin Homes Looks Like A Great Dividend Stock

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Can Fin Homes does. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Can Fin Homes that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.