United Nilgiri Tea Estates (NSE:UNITEDTEA) Is Due To Pay A Dividend Of ₹1.00

The United Nilgiri Tea Estates Company Limited (NSE:UNITEDTEA) will pay a dividend of ₹1.00 on the 15th of April. This means the annual payment will be 0.8% of the current stock price, which is lower than the industry average.

Check out our latest analysis for United Nilgiri Tea Estates

United Nilgiri Tea Estates' Earnings Easily Cover the Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, United Nilgiri Tea Estates was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS could expand by 1.0% if recent trends continue. If the dividend continues on this path, the payout ratio could be 14% by next year, which we think can be pretty sustainable going forward.

United Nilgiri Tea Estates Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the dividend has gone from ₹2.25 to ₹2.70. This means that it has been growing its distributions at 1.8% per annum over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

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. However, United Nilgiri Tea Estates' EPS was effectively flat over the past five years, which could stop the company from paying more every year. If United Nilgiri Tea Estates is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On United Nilgiri Tea Estates' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While United Nilgiri Tea Estates is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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 United Nilgiri Tea Estates that investors need to be conscious of moving forward. Is United Nilgiri Tea Estates not quite the opportunity you were looking for? Why not check out our selection of top 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.