Sun TV Network's (NSE:SUNTV) Upcoming Dividend Will Be Larger Than Last Year's

Sun TV Network Limited (NSE:SUNTV) will increase its dividend from last year's comparable payment on the 10th of December to ₹5.00. This will take the dividend yield to an attractive 2.3%, providing a nice boost to shareholder returns.

See our latest analysis for Sun TV Network

Sun TV Network's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Sun TV Network's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 16.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ₹9.50 in 2013 to the most recent total annual payment of ₹15.00. This implies that the company grew its distributions at a yearly rate of about 4.7% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Sun TV Network Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Sun TV Network has seen EPS rising for the last five years, at 5.4% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Sun TV Network's prospects of growing its dividend payments in the future.

Our Thoughts On Sun TV Network's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Sun TV Network that you should be aware of before investing. 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.