Indian Railway Catering & Tourism (NSE:IRCTC) Is Paying Out A Larger Dividend Than Last Year

Indian Railway Catering & Tourism Corporation Limited's (NSE:IRCTC) periodic dividend will be increasing on the 12th of December to ₹5.00, with investors receiving 25% more than last year's ₹4.00. This will take the dividend yield to an attractive 1.1%, providing a nice boost to shareholder returns.

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Indian Railway Catering & Tourism's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Indian Railway Catering & Tourism's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 19.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 54%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Indian Railway Catering & Tourism

Indian Railway Catering & Tourism's Dividend Has Lacked Consistency

Indian Railway Catering & Tourism has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2019, the annual payment back then was ₹2.00, compared to the most recent full-year payment of ₹8.00. This means that it has been growing its distributions at 26% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Indian Railway Catering & Tourism has been growing its earnings per share at 30% a year over the past five years. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

Indian Railway Catering & Tourism Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Indian Railway Catering & Tourism that investors should know about before committing capital to this stock. Is Indian Railway Catering & Tourism not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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