GPT Infraprojects Limited (NSE:GPTINFRA) has announced it will be reducing its dividend payable on the 18th of September to ₹1.00. This means the annual payment is 2.6% of the current stock price, which is above the average for the industry.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that GPT Infraprojects' stock price has increased by 154% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.
View our latest analysis for GPT Infraprojects
GPT Infraprojects' Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, GPT Infraprojects' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS could expand by 10.2% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 35%, which is in the range that makes us comfortable with the sustainability of the dividend.
GPT Infraprojects' Dividend Has Lacked Consistency
It's comforting to see that GPT Infraprojects has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The first annual payment during the last 9 years was ₹0.75 in 2012, and the most recent fiscal year payment was ₹2.00. This means that it has been growing its distributions at 12% per annum over that time. 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
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. GPT Infraprojects has impressed us by growing EPS at 10% 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.
We Really Like GPT Infraprojects' Dividend
In general, we don't like to see the dividend being cut, especially when the company has such high potential like GPT Infraprojects 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. Just as an example, we've come across 5 warning signs for GPT Infraprojects you should be aware of, and 2 of them are significant. 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. 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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About NSEI:GPTINFRA
GPT Infraprojects
Engages in the execution of civil and infrastructure projects in India and internationally.
Flawless balance sheet with solid track record and pays a dividend.
