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. This makes the dividend yield about the same as the industry average at 0.7%.

See our latest analysis for Ashiana Housing

Ashiana Housing's Distributions May Be Difficult To Sustain

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. While Ashiana Housing is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. 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.

Recent, EPS has fallen by 68.8%, so this could continue over the next year. This means the company won't be turning a profit, which could place managers in the tough spot of having to choose between suspending the dividend or putting more pressure on the balance sheet.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2012, the dividend has gone from ₹0.45 total annually to ₹1.00. This works out to be a compound annual growth rate (CAGR) of approximately 8.3% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

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. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Ashiana Housing's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Ashiana Housing will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

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. To that end, Ashiana Housing has 3 warning signs (and 1 which can't be ignored) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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