Tata Elxsi's (NSE:TATAELXSI) Dividend Will Be Increased To ₹70.00

Tata Elxsi Limited (NSE:TATAELXSI) has announced that it will be increasing its dividend from last year's comparable payment on the 9th of August to ₹70.00. The payment will take the dividend yield to 1.0%, which is in line with the average for the industry.

See our latest analysis for Tata Elxsi

Tata Elxsi's Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Tata Elxsi's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 45.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 49%, which is in the range that makes us comfortable with the sustainability of the dividend.

Tata Elxsi Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was ₹2.50, compared to the most recent full-year payment of ₹70.00. This means that it has been growing its distributions at 40% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Tata Elxsi has grown earnings per share at 22% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Tata Elxsi could prove to be a strong dividend payer.

Tata Elxsi Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. 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. However, there are other things to consider for investors when analysing stock performance. Earnings growth generally bodes well for the future value of company dividend payments. See if the 12 Tata Elxsi analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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