D-Link (India) (NSE:DLINKINDIA) Is Increasing Its Dividend To ₹15.00

D-Link (India) Limited's (NSE:DLINKINDIA) dividend will be increasing from last year's payment of the same period to ₹15.00 on 7th of September. This will take the dividend yield to an attractive 4.2%, providing a nice boost to shareholder returns.

We've discovered 1 warning sign about D-Link (India). View them for free.

D-Link (India)'s Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, D-Link (India) was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Over the next year, EPS could expand by 24.2% if the company continues along the path it has been on recently. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 75%, which is definitely on the higher side, but we wouldn't necessarily say this is unsustainable.

Check out our latest analysis for D-Link (India)

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ₹0.60 in 2015, and the most recent fiscal year payment was ₹20.00. This works out to be a compound annual growth rate (CAGR) of approximately 42% a year over that time. D-Link (India) has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. D-Link (India) has impressed us by growing EPS at 24% per year over the past five years. D-Link (India) is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Our Thoughts On D-Link (India)'s Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for D-Link (India) that you should be aware of before investing. 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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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.