Infosys (NSE:INFY) Has Announced A Dividend Of $21.00

The board of Infosys Limited (NSE:INFY) has announced that it will pay a dividend on the 8th of November, with investors receiving $21.00 per share. This makes the dividend yield 2.2%, which is above the industry average.

Check out our latest analysis for Infosys

Infosys' Projections Indicate Future Payments May Be Unsustainable

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Infosys was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

The next 12 months is set to see EPS grow by 26.3%. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to 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 2014, the annual payment back then was $0.127, compared to the most recent full-year payment of $0.50. This means that it has been growing its distributions at 15% per annum over that time. 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.

The Dividend Has 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. Infosys has impressed us by growing EPS at 8.9% per year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

We Really Like Infosys' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Infosys that investors need to be conscious of moving forward. Is Infosys not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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