Infosys' (NSE:INFY) Upcoming Dividend Will Be Larger Than Last Year's

The board of Infosys Limited (NSE:INFY) has announced that it will be paying its dividend of $28.00 on the 1st of July, an increased payment from last year's comparable dividend. This will take the annual payment to 2.8% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Infosys

Infosys Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Infosys' earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next 12 months is set to see EPS grow by 18.2%. 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. The annual payment during the last 10 years was $0.0921 in 2014, and the most recent fiscal year payment was $0.48. This means that it has been growing its distributions at 18% per annum over that time. 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.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Infosys has impressed us by growing EPS at 8.6% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Infosys Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Infosys is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

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. For instance, we've picked out 2 warning signs for Infosys that investors should take into consideration. 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.