Genus Power Infrastructures' (NSE:GENUSPOWER) Upcoming Dividend Will Be Larger Than Last Year's

Simply Wall St
August 21, 2021
Source: Shutterstock

Genus Power Infrastructures Limited (NSE:GENUSPOWER) will increase its dividend on the 15th of October to ₹0.50. This makes the dividend yield about the same as the industry average at 0.8%.

Check out our latest analysis for Genus Power Infrastructures

Genus Power Infrastructures' Payment Has Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Genus Power Infrastructures was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Unless the company can turn things around, EPS could fall by 3.2% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 16%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

NSEI:GENUSPOWER Historic Dividend August 22nd 2021

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The first annual payment during the last 10 years was ₹0.10 in 2011, and the most recent fiscal year payment was ₹0.50. This means that it has been growing its distributions at 17% per annum over that time. Genus Power Infrastructures 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.

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. Genus Power Infrastructures has seen earnings per share falling at 3.2% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On Genus Power Infrastructures' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Genus Power Infrastructures' payments are rock solid. 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. Just as an example, we've come across 2 warning signs for Genus Power Infrastructures you should be aware of, and 1 of them is a bit unpleasant. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

If you’re looking to trade Genus Power Infrastructures, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.