India Tourism Development Corporation Limited (NSE:ITDC) Passed Our Checks, And It's About To Pay A ₹2.90 Dividend

It looks like India Tourism Development Corporation Limited (NSE:ITDC) is about to go ex-dividend in the next 3 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase India Tourism Development's shares before the 9th of September in order to receive the dividend, which the company will pay on the 15th of October.

The company's next dividend payment will be ₹2.90 per share, on the back of last year when the company paid a total of ₹2.90 to shareholders. Last year's total dividend payments show that India Tourism Development has a trailing yield of 0.5% on the current share price of ₹552.55. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately India Tourism Development's payout ratio is modest, at just 30% of profit. A useful secondary check can be to evaluate whether India Tourism Development generated enough free cash flow to afford its dividend. Dividends consumed 50% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that India Tourism Development's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Check out our latest analysis for India Tourism Development

Click here to see how much of its profit India Tourism Development paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see India Tourism Development's earnings have been skyrocketing, up 27% per annum for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. India Tourism Development has delivered an average of 19% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Has India Tourism Development got what it takes to maintain its dividend payments? Earnings per share have grown at a nice rate in recent times and over the last year, India Tourism Development paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about India Tourism Development, and we would prioritise taking a closer look at it.

In light of that, while India Tourism Development has an appealing dividend, it's worth knowing the risks involved with this stock. Every company has risks, and we've spotted 1 warning sign for India Tourism Development you should know about.

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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.