Wonderla Holidays (NSE:WONDERLA) Is Due To Pay A Dividend Of ₹2.50

The board of Wonderla Holidays Limited (NSE:WONDERLA) has announced that it will pay a dividend of ₹2.50 per share on the 20th of September. This means that the annual payment will be 0.3% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Wonderla Holidays

Wonderla Holidays' Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Based on the last payment, Wonderla Holidays was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

The next year is set to see EPS grow by 96.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 4.8% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ₹1.50 in 2014, and the most recent fiscal year payment was ₹2.50. This works out to be a compound annual growth rate (CAGR) of approximately 5.2% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Wonderla Holidays might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Wonderla Holidays has been growing its earnings per share at 23% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Our Thoughts On Wonderla Holidays' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Wonderla Holidays' payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Wonderla Holidays you should be aware of, and 1 of them can't be ignored. 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.

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