Indian Energy Exchange's (NSE:IEX) Dividend Will Be ₹1.00

Indian Energy Exchange Limited's (NSE:IEX) investors are due to receive a payment of ₹1.00 per share on 1st of January. Including this payment, the dividend yield on the stock will be 1.3%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Indian Energy Exchange

Indian Energy Exchange's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. The last dividend was quite easily covered by Indian Energy Exchange's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

According to analysts, EPS should be several times higher next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 17%, which makes us pretty comfortable with the sustainability of the dividend.

Indian Energy Exchange's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. The annual payment during the last 4 years was ₹0.733 in 2018, and the most recent fiscal year payment was ₹2.00. This works out to be a compound annual growth rate (CAGR) of approximately 29% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Indian Energy Exchange has been growing its earnings per share at 21% a year over the past five years. Indian Energy Exchange is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

We Really Like Indian Energy Exchange's Dividend

Overall, we like to see the dividend staying consistent, and we think Indian Energy Exchange might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Indian Energy Exchange that investors should know about before committing capital to this stock. 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.