Alphageo (India) Limited (NSE:ALPHAGEO) has announced that it will pay a dividend of ₹8.00 per share on the 24th of October. This means the annual payment is 2.8% of the current stock price, which is above the average for the industry.
See our latest analysis for Alphageo (India)
Alphageo (India)'s Payment Has Solid Earnings Coverage
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Alphageo (India) was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.
Unless the company can turn things around, EPS could fall by 26.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 60%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the dividend has gone from ₹1.00 total annually to ₹8.00. This means that it has been growing its distributions at 23% per annum over that time. Alphageo (India) has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend Has Limited Growth Potential
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been sinking by 26% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.
Our Thoughts On Alphageo (India)'s Dividend
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. To that end, Alphageo (India) has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
About NSEI:ALPHAGEO
Alphageo (India)
Provides geophysical seismic data acquisition, processing, and interpretation services for exploration of hydrocarbons and minerals in India.
Flawless balance sheet with proven track record and pays a dividend.
