Alldigi Tech (NSE:ALLDIGI) Is Due To Pay A Dividend Of ₹30.00

Alldigi Tech Limited (NSE:ALLDIGI) has announced that it will pay a dividend of ₹30.00 per share on the 18th of November. This makes the dividend yield 4.6%, which will augment investor returns quite nicely.

See our latest analysis for Alldigi Tech

Alldigi Tech's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Alldigi Tech's dividend made up quite a large proportion of earnings but only 75% of free cash flows. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Over the next year, EPS could expand by 19.6% if the company continues along the path it has been on recently. If recent patterns in the dividend continue, the payout ratio in 12 months could be 91% which is a bit high but can definitely be sustainable.

Alldigi Tech's Dividend Has Lacked Consistency

Alldigi Tech has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2018, the annual payment back then was ₹5.00, compared to the most recent full-year payment of ₹45.00. This means that it has been growing its distributions at 44% per annum over that time. Alldigi Tech has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Alldigi Tech's Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Alldigi Tech has grown earnings per share at 20% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Alldigi Tech's 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 don't think Alldigi Tech is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Alldigi Tech that you should be aware of before investing. Is Alldigi Tech 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.