L&T Technology Services (NSE:LTTS) Has Announced That It Will Be Increasing Its Dividend To ₹17.00

L&T Technology Services Limited (NSE:LTTS) will increase its dividend on the 16th of November to ₹17.00, which is 13% higher than last year's payment from the same period of ₹15.00. Despite this raise, the dividend yield of 1.0% is only a modest boost to shareholder returns.

See our latest analysis for L&T Technology Services

L&T Technology Services' Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. The last dividend was quite easily covered by L&T Technology Services' earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 44.2%. 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.

L&T Technology Services' Dividend Has Lacked Consistency

L&T Technology Services 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. The annual payment during the last 7 years was ₹6.00 in 2016, and the most recent fiscal year payment was ₹45.00. This works out to be a compound annual growth rate (CAGR) of approximately 33% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

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. L&T Technology Services has impressed us by growing EPS at 12% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

We Really Like L&T Technology Services' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for L&T Technology Services that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield 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.