Indian Railway Catering & Tourism's (NSE:IRCTC) Dividend Will Be ₹4.00

Indian Railway Catering & Tourism Corporation Limited (NSE:IRCTC) has announced that it will pay a dividend of ₹4.00 per share on the 4th of December. This will take the annual payment to 0.8% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Indian Railway Catering & Tourism

Indian Railway Catering & Tourism's Future Dividend Projections Appear Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Indian Railway Catering & Tourism was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 54.9%. If the dividend continues on this path, the payout ratio could be 43% by next year, which we think can be pretty sustainable going forward.

Indian Railway Catering & Tourism's Dividend Has Lacked Consistency

Looking back, Indian Railway Catering & Tourism's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of ₹2.00 in 2019 to the most recent total annual payment of ₹6.50. This works out to be a compound annual growth rate (CAGR) of approximately 27% a year over that time. Indian Railway Catering & Tourism 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.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Indian Railway Catering & Tourism has seen EPS rising for the last five years, at 33% per annum. 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.

We Really Like Indian Railway Catering & Tourism's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Case in point: We've spotted 2 warning signs for Indian Railway Catering & Tourism (of which 1 shouldn't be ignored!) you should know about. 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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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.