IRB Infrastructure Developers (NSE:IRB) Is Due To Pay A Dividend Of ₹0.10

The board of IRB Infrastructure Developers Limited (NSE:IRB) has announced that it will pay a dividend of ₹0.10 per share on the 29th of November. This means the dividend yield will be fairly typical at 0.6%.

View our latest analysis for IRB Infrastructure Developers

IRB Infrastructure Developers' Payment Could Potentially Have Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, IRB Infrastructure Developers was easily earning enough to 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 rise by 147.0% over the next year. If the dividend continues on this path, the payout ratio could be 15% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from ₹0.80 total annually to ₹0.30. This works out to be a decline of approximately 9.3% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Potential Is Shaky

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Earnings per share has been sinking by 16% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about IRB Infrastructure Developers' payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, IRB Infrastructure Developers has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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