Transport Corporation of India (NSE:TCI) Is Due To Pay A Dividend Of ₹2.50

Transport Corporation of India Limited (NSE:TCI) will pay a dividend of ₹2.50 on the 2nd of March. Including this payment, the dividend yield on the stock will be 0.5%, which is a modest boost for shareholders' returns.

See our latest analysis for Transport Corporation of India

Transport Corporation of India's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, Transport Corporation of India's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 59.8%. If the dividend continues on this path, the payout ratio could be 12% by next year, which we think can be pretty sustainable going forward.

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 2014, and the most recent fiscal year payment was ₹4.50. This means that it has been growing its distributions at 16% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Transport Corporation of India has impressed us by growing EPS at 18% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Transport Corporation of India's prospects of growing its dividend payments in the future.

We Really Like Transport Corporation of India's Dividend

Overall, we like to see the dividend staying consistent, and we think Transport Corporation of India might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 1 warning sign for Transport Corporation of India that investors need to be conscious of moving forward. 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.