Delta (NSE:DELTACORP) Is Due To Pay A Dividend Of ₹1.25

Delta Corp Limited (NSE:DELTACORP) has announced that it will pay a dividend of ₹1.25 per share on the 22nd of September. This means the annual payment is 0.9% of the current stock price, which is above the average for the industry.

View our latest analysis for Delta

Delta's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Delta's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, EPS could fall by 0.1% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 20%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from ₹0.25 total annually to ₹1.25. This works out to be a compound annual growth rate (CAGR) of approximately 17% 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.

Dividend Growth May Be Hard To Achieve

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. Delta hasn't seen much change in its earnings per share over the last five years.

Delta's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Delta that investors should know about before committing capital to this stock. Is Delta not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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