Tata Consultancy Services' (NSE:TCS) Shareholders Will Receive A Bigger Dividend Than Last Year

Tata Consultancy Services Limited's (NSE:TCS) dividend will be increasing to ₹22.00 on 13th of June. This takes the annual payment to 1.2% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Tata Consultancy Services

Tata Consultancy Services' Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Tata Consultancy Services 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 year is set to see EPS grow by 14.2%. If the dividend continues on this path, the payout ratio could be 40% by next year, which we think can be pretty sustainable going forward.

Tata Consultancy Services Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from ₹7.00 in 2012 to the most recent annual payment of ₹43.00. This means that it has been growing its distributions at 20% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

The Dividend Has Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Tata Consultancy Services has impressed us by growing EPS at 9.4% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

We Really Like Tata Consultancy Services' Dividend

Overall, a dividend increase is always good, and we think that Tata Consultancy Services is a strong income stock thanks to its track record and growing earnings. 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. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 42 analysts we track are forecasting for Tata Consultancy Services for free with public 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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