Ircon International (NSE:IRCON) Is Due To Pay A Dividend Of ₹1.65

Ircon International Limited's (NSE:IRCON) investors are due to receive a payment of ₹1.65 per share on 13th of March. This means the annual payment is 1.9% of the current stock price, which is above the average for the industry.

View our latest analysis for Ircon International

Ircon International's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Ircon International is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

The next year is set to see EPS grow by 20.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 31%, which is in the range that makes us comfortable with the sustainability of the dividend.

Ircon International's Dividend Has Lacked Consistency

Ircon International has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2019, the dividend has gone from ₹2.14 total annually to ₹3.10. This implies that the company grew its distributions at a yearly rate of about 6.3% over that duration. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Ircon International has been growing its earnings per share at 10% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Ircon International's prospects of growing its dividend payments in the future.

Our Thoughts On Ircon International's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Ircon International that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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