RailTel Corporation of India (NSE:RAILTEL) Is Due To Pay A Dividend Of ₹1.00

RailTel Corporation of India Limited's (NSE:RAILTEL) investors are due to receive a payment of ₹1.00 per share on 25th of November. Including this payment, the dividend yield on the stock will be 0.8%, which is a modest boost for shareholders' returns.

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RailTel Corporation of India's Future Dividend Projections Appear Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, RailTel Corporation of India's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS is forecast to expand by 62.1%. If the dividend continues on this path, the payout ratio could be 19% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for RailTel Corporation of India

RailTel Corporation of India's Dividend Has Lacked Consistency

It's comforting to see that RailTel Corporation of India has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 5 years was ₹2.00 in 2020, and the most recent fiscal year payment was ₹2.85. This works out to be a compound annual growth rate (CAGR) of approximately 7.3% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

The Dividend Looks Likely To Grow

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. RailTel Corporation of India has seen EPS rising for the last five years, at 18% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for RailTel Corporation of India's prospects of growing its dividend payments in the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about RailTel Corporation of India's payments, as there could be some issues with sustaining them into the future. While RailTel Corporation of India is earning enough to cover the payments, the cash flows are lacking. We don't think RailTel Corporation of India is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for RailTel Corporation of India you should be aware of, and 1 of them is significant. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.