Kolte-Patil Developers (NSE:KOLTEPATIL) Is Due To Pay A Dividend Of ₹4.00

The board of Kolte-Patil Developers Limited (NSE:KOLTEPATIL) has announced that it will pay a dividend of ₹4.00 per share on the 16th of September. Based on this payment, the dividend yield on the company's stock will be 1.0%, which is an attractive boost to shareholder returns.

View our latest analysis for Kolte-Patil Developers

Kolte-Patil Developers' Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Despite not generating a profit, Kolte-Patil Developers is still paying a dividend. It is also not generating any free cash flow, we definitely have concerns when it comes to the sustainability of the dividend.

Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 14%, which makes us pretty comfortable with the sustainability of the dividend.

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. Since 2014, the dividend has gone from ₹3.50 total annually to ₹4.00. This implies that the company grew its distributions at a yearly rate of about 1.3% over that duration. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth May Be Hard To Achieve

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. It's not great to see that Kolte-Patil Developers' earnings per share has fallen at approximately 4.5% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

We're Not Big Fans Of Kolte-Patil Developers' Dividend

In summary, while it is good to see that the dividend hasn't been cut, we think that at current levels the payment isn't particularly sustainable. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

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 2 warning signs for Kolte-Patil Developers that you should be aware of before investing. Is Kolte-Patil Developers not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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