Adani Ports and Special Economic Zone (NSE:ADANIPORTS) Is Increasing Its Dividend To ₹7.00

Adani Ports and Special Economic Zone Limited (NSE:ADANIPORTS) will increase its dividend from last year's comparable payment on the 26th of July to ₹7.00. This takes the annual payment to 0.5% of the current stock price, which is about average for the industry.

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 Adani Ports and Special Economic Zone's stock price has increased by 39% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Adani Ports and Special Economic Zone's Projected Earnings Seem Likely To Cover Future Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. However, Adani Ports and Special Economic Zone's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 50.1% over the next year. If the dividend continues on this path, the payout ratio could be 11% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Adani Ports and Special Economic Zone

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ₹1.00 in 2015, and the most recent fiscal year payment was ₹7.00. This works out to be a compound annual growth rate (CAGR) of approximately 21% 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 Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Adani Ports and Special Economic Zone has been growing its earnings per share at 23% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Adani Ports and Special Economic Zone's Dividend

Overall, a dividend increase is always good, and we think that Adani Ports and Special Economic Zone is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Adani Ports and Special Economic Zone that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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