RailTel Corporation of India (NSE:RAILTEL) Is Paying Out Less In Dividends Than Last Year

RailTel Corporation of India Limited (NSE:RAILTEL) has announced that on 30th of October, it will be paying a dividend of₹0.65, which a reduction from last year's comparable dividend. This payment takes the dividend yield to 3.3%, which only provides a modest boost to overall returns.

See our latest analysis for RailTel Corporation of India

RailTel Corporation of India's Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. The last dividend was quite comfortably covered by RailTel Corporation of India's earnings, but it was a bit tighter on the cash flow front. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

The next year is set to see EPS grow by 49.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.

RailTel Corporation of India Doesn't Have A Long Payment History

It is tough to make a judgement on how stable a dividend is when the company hasn't been paying one for very long. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that RailTel Corporation of India has been growing its earnings per share at 11% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

In Summary

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While RailTel Corporation of India is earning enough to cover the dividend, we are generally unimpressed with its future prospects. 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. For example, we've picked out 1 warning sign for RailTel Corporation of India that investors should know about before committing capital to this stock. 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.