Accelya Solutions India (NSE:ACCELYA) Is Paying Out Less In Dividends Than Last Year

The board of Accelya Solutions India Limited (NSE:ACCELYA) has announced it will be reducing its dividend by 33% from last year's payment of ₹45.00 on the 7th of November, with shareholders receiving ₹30.00. The yield is still above the industry average at 5.8%.

View our latest analysis for Accelya Solutions India

Accelya Solutions India's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, the company's dividend was much higher than its earnings. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Over the next year, EPS could expand by 7.3% if recent trends continue. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 69% which brings it into quite a comfortable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the annual payment back then was ₹10.00, compared to the most recent full-year payment of ₹80.00. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

There Isn't Much Room To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Accelya Solutions India has grown earnings per share at 7.3% per year over the past five years. Although per-share earnings are growing at a credible rate, the massive payout ratio may limit growth in the company's future dividend payments.

Accelya Solutions India's Dividend Doesn't Look Sustainable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. The track record isn't great, and the payments are a bit high to be considered sustainable. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Accelya Solutions India that investors need to be conscious of moving forward. Is Accelya Solutions India not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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