Ingersoll-Rand (India) (NSE:INGERRAND) Is Due To Pay A Dividend Of ₹25.00

Ingersoll-Rand (India) Limited (NSE:INGERRAND) has announced that it will pay a dividend of ₹25.00 per share on the 22nd of August. This will take the dividend yield to an attractive 2.1%, providing a nice boost to shareholder returns.

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Ingersoll-Rand (India)'s Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Ingersoll-Rand (India) was paying out quite a large proportion of both earnings and cash flow, with the dividend being 117% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Earnings per share is forecast to rise by 40.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 89%, which is on the higher side, but certainly still feasible.

View our latest analysis for Ingersoll-Rand (India)

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the dividend has gone from ₹6.00 total annually to ₹80.00. This means that it has been growing its distributions at 30% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth Could Be Constrained

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Ingersoll-Rand (India) has impressed us by growing EPS at 26% per year over the past five years. EPS is growing rapidly, although the company is also paying out a large portion of its profits as dividends. If earnings keep growing, the dividend may be sustainable, but generally we'd prefer to see a fast growing company reinvest in further growth.

Ingersoll-Rand (India)'s Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Ingersoll-Rand (India)'s payments are rock solid. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We don't think Ingersoll-Rand (India) is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Ingersoll-Rand (India) that you should be aware of before investing. Is Ingersoll-Rand (India) not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.