Dhunseri Investments (NSE:DHUNINV) Is Paying Out A Larger Dividend Than Last Year

Dhunseri Investments Limited (NSE:DHUNINV) has announced that it will be increasing its dividend on the 16th of October to ₹2.50. Despite this raise, the dividend yield of 0.5% is only a modest boost to shareholder returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Dhunseri Investments' stock price has increased by 96% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Dhunseri Investments

Dhunseri Investments' Earnings Easily Cover the Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Dhunseri Investments was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS could expand by 1.0% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 1.1%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2011, the first annual payment was ₹1.25, compared to the most recent full-year payment of ₹2.50. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% 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. Dhunseri Investments might have put its house in order since then, but we remain cautious.

Dhunseri Investments May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Dhunseri Investments hasn't seen much change in its earnings per share over the last five years. While growth may be thin on the ground, Dhunseri Investments could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Dhunseri Investments' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Dhunseri Investments is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 3 warning signs for Dhunseri Investments that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.

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This article by Simply Wall St is general in nature. 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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