IRB Infrastructure Developers (NSE:IRB) Has Announced That Its Dividend Will Be Reduced To ₹0.07

The board of IRB Infrastructure Developers Limited (NSE:IRB) has announced that the dividend on 12th of September will be reduced by 30% from last year's ₹0.10 to ₹0.07. This means that the annual payment will be 0.7% of the current stock price, which is in line with the average for the industry.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

IRB Infrastructure Developers' Projected Earnings Seem Likely To Cover Future Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, IRB Infrastructure Developers' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 77.2% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 11%, which we are pretty comfortable with and we think is feasible on an earnings basis.

See our latest analysis for IRB Infrastructure Developers

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ₹0.40 in 2015, and the most recent fiscal year payment was ₹0.30. This works out to be a decline of approximately 2.8% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. IRB Infrastructure Developers has impressed us by growing EPS at 51% 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.

IRB Infrastructure Developers Looks Like A Great Dividend Stock

Overall, we think that IRB Infrastructure Developers could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, IRB Infrastructure Developers has 4 warning signs (and 2 which are concerning) we think you should know about. Is IRB Infrastructure Developers not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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.