Ashiana Housing (NSE:ASHIANA) Is Increasing Its Dividend To ₹0.50

The board of Ashiana Housing Limited (NSE:ASHIANA) has announced that it will be paying its dividend of ₹0.50 on the 17th of October, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 0.7%, which is fairly typical for the industry.

See our latest analysis for Ashiana Housing

Ashiana Housing's Distributions May Be Difficult To Sustain

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Even though Ashiana Housing isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Over the next year, EPS might fall by 68.8% based on recent performance. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.

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 2012, the annual payment back then was ₹0.45, compared to the most recent full-year payment of ₹1.00. This means that it has been growing its distributions at 8.3% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Ashiana Housing might have put its house in order since then, but we remain cautious.

The Dividend Has Limited Growth Potential

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. Earnings per share has been sinking by 69% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

The Dividend Could Prove To Be Unreliable

In summary, while it's always good to see the dividend being raised, we don't think Ashiana Housing's payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for Ashiana Housing (of which 1 shouldn't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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