RITES (NSE:RITES) Will Pay A Dividend Of ₹5.00

The board of RITES Limited (NSE:RITES) has announced that it will pay a dividend of ₹5.00 per share on the 12th of October. This means the annual payment is 2.7% of the current stock price, which is above the average for the industry.

View our latest analysis for RITES

RITES' Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. At the time of the last dividend payment, RITES was paying out a very large proportion of what it was earning and 147% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Over the next year, EPS is forecast to expand by 80.3%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 62% which would be quite comfortable going to take the dividend forward.

RITES' Dividend Has Lacked Consistency

Looking back, RITES' dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The annual payment during the last 6 years was ₹5.32 in 2018, and the most recent fiscal year payment was ₹18.00. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. 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.

RITES May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. RITES hasn't seen much change in its earnings per share over the last five years.

The Dividend Could Prove To Be Unreliable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The track record isn't great, and the payments are a bit high to be considered sustainable. We don't think RITES is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for RITES that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.