Vindhya Telelinks (NSE:VINDHYATEL) Is Due To Pay A Dividend Of ₹10.00

Vindhya Telelinks Limited's (NSE:VINDHYATEL) investors are due to receive a payment of ₹10.00 per share on 23rd of October. Based on this payment, the dividend yield on the company's stock will be 0.8%, which is an attractive boost to shareholder returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Vindhya Telelinks' stock price has increased by 47% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Vindhya Telelinks

Vindhya Telelinks' Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Vindhya Telelinks was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, EPS could fall by 0.6% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 7.7%, which is definitely feasible to continue.

Vindhya Telelinks' Dividend Has Lacked Consistency

Vindhya Telelinks has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2014, the dividend has gone from ₹2.00 total annually to ₹10.00. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Although it's important to note that Vindhya Telelinks' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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 probably look elsewhere for an income investment.

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. To that end, Vindhya Telelinks has 3 warning signs (and 1 which is potentially serious) we think you should know about. 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.