Dhunseri Investments' (NSE:DHUNINV) Shareholders Will Receive A Bigger Dividend Than Last Year

Dhunseri Investments Limited (NSE:DHUNINV) has announced that it will be increasing its dividend on the 7th of October to ₹2.50. Even though the dividend went up, the yield is still quite low at only 0.4%.

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 99% 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' Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Prior to this announcement, Dhunseri Investments' 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, earnings per share could rise by 1.0% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 1.1% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was ₹1.25 in 2011, and the most recent fiscal year payment was ₹2.50. This means that it has been growing its distributions at 7.2% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Dhunseri Investments hasn't seen much change in its earnings per share over the last five years. If Dhunseri Investments is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

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. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 3 warning signs for Dhunseri Investments that investors need to be conscious of moving forward. 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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