Coforge (NSE:COFORGE) Has Announced A Dividend Of ₹19.00

The board of Coforge Limited (NSE:COFORGE) has announced that it will pay a dividend on the 21st of February, with investors receiving ₹19.00 per share. This payment means the dividend yield will be 0.8%, which is below the average for the industry.

View our latest analysis for Coforge

Coforge's Payment Could Potentially Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, Coforge's profits didn't cover the dividend, but the company was generating enough cash instead. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

Looking forward, earnings per share is forecast to rise by 126.7% over the next year. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 34% which brings it into quite a comfortable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was ₹9.00, compared to the most recent full-year payment of ₹76.00. This implies that the company grew its distributions at a yearly rate of about 24% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Coforge's Dividend Might Lack Growth

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Coforge has been growing its earnings per share at 11% a year over the past five years. However, the payout ratio is very high, not leaving much room for growth of the dividend in the future.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Coforge that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.