United Nilgiri Tea Estates' (NSE:UNITEDTEA) Dividend Will Be ₹1.00

The United Nilgiri Tea Estates Company Limited (NSE:UNITEDTEA) has announced that it will pay a dividend of ₹1.00 per share on the 29th of April. Based on this payment, the dividend yield will be 1.0%, which is fairly typical for the industry.

Check out our latest analysis for United Nilgiri Tea Estates

United Nilgiri Tea Estates' Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, United Nilgiri Tea Estates' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 4.2% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 14%, which is definitely feasible to continue.

United Nilgiri Tea Estates Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was ₹2.30 in 2013, and the most recent fiscal year payment was ₹2.70. This means that it has been growing its distributions at 1.6% per annum over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

United Nilgiri Tea Estates May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. It's not great to see that United Nilgiri Tea Estates' earnings per share has fallen at approximately 4.2% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Our Thoughts On United Nilgiri Tea Estates' Dividend

Overall, a consistent dividend is a good thing, and we think that United Nilgiri Tea Estates has the ability to continue this into the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for United Nilgiri Tea Estates (of which 1 shouldn't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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