Titan (NSE:TITAN) Has Re-Affirmed Its Dividend Of ₹4.00

The board of Titan Company Limited (NSE:TITAN) has announced that it will pay a dividend on the 1st of September, with investors receiving ₹4.00 per share. The dividend yield is 0.2% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for Titan

Titan's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, Titan's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 96.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 21%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The first annual payment during the last 10 years was ₹0.75 in 2011, and the most recent fiscal year payment was ₹4.00. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year over that time. Titan 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 Has Growth Potential

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. We are encouraged to see that Titan has grown earnings per share at 7.6% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Titan's prospects of growing its dividend payments in the future.

In Summary

Overall, we think Titan is a solid choice as a dividend stock, even though the dividend wasn't raised this year. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Titan that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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