Triveni Engineering & Industries (NSE:TRIVENI) Will Pay A Smaller Dividend Than Last Year

Triveni Engineering & Industries Limited (NSE:TRIVENI) has announced that on 13th of October, it will be paying a dividend of₹1.25, which a reduction from last year's comparable dividend. Based on this payment, the dividend yield will be 0.5%, which is lower than the average for the industry.

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 Triveni Engineering & Industries' stock price has increased by 45% 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 Triveni Engineering & Industries

Triveni Engineering & Industries' Earnings Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Triveni Engineering & Industries' 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.

The next year is set to see EPS grow by 25.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 39%, which is in the range that makes us comfortable with the sustainability of the dividend.

Triveni Engineering & Industries' Dividend Has Lacked Consistency

It's comforting to see that Triveni Engineering & Industries has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the dividend has gone from ₹0.25 total annually to ₹2.50. This implies that the company grew its distributions at a yearly rate of about 39% over that duration. Triveni Engineering & Industries 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 Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. It's encouraging to see that Triveni Engineering & Industries has been growing its earnings per share at 15% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While Triveni Engineering & Industries is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

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. Just as an example, we've come across 3 warning signs for Triveni Engineering & Industries you should be aware of, and 1 of them is a bit concerning. 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.