Zee Entertainment Enterprises' (NSE:ZEEL) Dividend Will Be Increased To ₹2.50

Zee Entertainment Enterprises Limited (NSE:ZEEL) will increase its dividend on the 14th of October to ₹2.50. This takes the annual payment to 1.3% of the current stock price, which is about average for the industry.

See our latest analysis for Zee Entertainment Enterprises

Zee Entertainment Enterprises' Earnings Easily Cover the Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, Zee Entertainment Enterprises' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 48.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 16% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The first annual payment during the last 10 years was ₹2.00 in 2011, and the most recent fiscal year payment was ₹2.50. This means that it has been growing its distributions at 2.3% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Zee Entertainment Enterprises May Find It Hard To Grow The Dividend

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. However, Zee Entertainment Enterprises' EPS was effectively flat over the past five years, which could stop the company from paying more every year. While EPS growth is quite low, Zee Entertainment Enterprises has the option to increase the payout ratio to return more cash to shareholders.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Zee Entertainment Enterprises that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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