Tide Water Oil (India) (NSE:TIDEWATER) Has Affirmed Its Dividend Of ₹15.00

The board of Tide Water Oil Co. (India) Limited (NSE:TIDEWATER) has announced that it will pay a dividend on the 22nd of September, with investors receiving ₹15.00 per share. Based on this payment, the dividend yield on the company's stock will be 4.8%, which is an attractive boost to shareholder returns.

View our latest analysis for Tide Water Oil (India)

Tide Water Oil (India)'s Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Tide Water Oil (India) was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Looking forward, earnings per share could rise by 1.4% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 70% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ₹4.00 in 2013, and the most recent fiscal year payment was ₹42.00. This implies that the company grew its distributions at a yearly rate of about 27% over that duration. Tide Water Oil (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's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Unfortunately, Tide Water Oil (India)'s earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Growth of 1.4% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Tide Water Oil (India)'s Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Tide Water Oil (India) is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Tide Water Oil (India) that investors need to be conscious of moving forward. Is Tide Water Oil (India) 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.