GPT Infraprojects (NSE:GPTINFRA) Has Announced That Its Dividend Will Be Reduced To ₹1.00

GPT Infraprojects Limited (NSE:GPTINFRA) is reducing its dividend to ₹1.00 on the 18th of September. The yield is still above the industry average at 3.1%.

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 118% 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' Earnings Easily Cover the Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, GPT Infraprojects was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 6.7% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 53%, 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. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The first annual payment during the last 9 years was ₹0.75 in 2012, and the most recent fiscal year payment was ₹2.50. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year 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.

We Could See GPT Infraprojects' Dividend Growing

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see GPT Infraprojects has been growing its earnings per share at 6.7% a year over the past five years. GPT Infraprojects definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On GPT Infraprojects' Dividend

Even though the dividend was cut this year, we think GPT Infraprojects has the ability to make consistent payments in the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 5 warning signs for GPT Infraprojects you should be aware of, and 2 of them don't sit too well with us. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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