Genus Power Infrastructures' (NSE:GENUSPOWER) Dividend Will Be Increased To ₹0.50

The board of Genus Power Infrastructures Limited (NSE:GENUSPOWER) has announced that it will be increasing its dividend on the 15th of October to ₹0.50. This takes the annual payment to 0.8% of the current stock price, which is about average for the industry.

View our latest analysis for Genus Power Infrastructures

Genus Power Infrastructures' Earnings Easily Cover the Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. However, Genus Power Infrastructures' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 3.2% over the next 12 months if recent trends continue. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 16%, which is definitely feasible to continue.

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 dividend has gone from ₹0.10 in 2011 to the most recent annual payment of ₹0.50. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year 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.

Genus Power Infrastructures May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. In the last five years, Genus Power Infrastructures' earnings per share has shrunk at approximately 3.2% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

Our Thoughts On Genus Power Infrastructures' Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Genus Power Infrastructures has 3 warning signs (and 1 which can't be ignored) we think you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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