Rail Vikas Nigam (NSE:RVNL) Is Paying Out A Larger Dividend Than Last Year

Rail Vikas Nigam Limited (NSE:RVNL) has announced that it will be increasing its dividend from last year's comparable payment on the 30th of October to ₹2.11. This takes the annual payment to 0.3% of the current stock price, which unfortunately is below what the industry is paying.

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 Rail Vikas Nigam's stock price has increased by 50% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Rail Vikas Nigam

Rail Vikas Nigam's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. However, Rail Vikas Nigam's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 37.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 25%, which is in the range that makes us comfortable with the sustainability of the dividend.

Rail Vikas Nigam Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 5 years of history we want to see a few more years of history before making any solid conclusions. Since 2019, the annual payment back then was ₹0.09, compared to the most recent full-year payment of ₹2.11. This implies that the company grew its distributions at a yearly rate of about 88% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Rail Vikas Nigam has grown earnings per share at 15% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Rail Vikas Nigam's prospects of growing its dividend payments in the future.

Rail Vikas Nigam Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Rail Vikas Nigam is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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, Rail Vikas Nigam has 2 warning signs (and 1 which is a bit concerning) we think you should know about. Is Rail Vikas Nigam 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.