Vindhya Telelinks' (NSE:VINDHYATEL) Shareholders Will Receive A Bigger Dividend Than Last Year

Vindhya Telelinks Limited (NSE:VINDHYATEL) has announced that it will be increasing its dividend from last year's comparable payment on the 10th of October to ₹15.00. This makes the dividend yield 0.8%, which is above the industry average.

View our latest analysis for Vindhya Telelinks

Vindhya Telelinks' Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Vindhya Telelinks is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share could rise by 6.1% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 9.1% by next year, which we think can be pretty sustainable going forward.

Vindhya Telelinks' Dividend Has Lacked Consistency

Vindhya Telelinks has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 9 years was ₹2.00 in 2014, and the most recent fiscal year payment was ₹15.00. This means that it has been growing its distributions at 25% per annum over that time. Vindhya Telelinks 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.

Vindhya Telelinks Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Vindhya Telelinks has grown earnings per share at 6.1% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Vindhya Telelinks' Dividend

Overall, we always like to see the dividend being raised, but we don't think Vindhya Telelinks will make a great income stock. While Vindhya Telelinks is earning enough to cover the payments, the cash flows are lacking. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Vindhya Telelinks has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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