TCI Express (NSE:TCIEXP) Could Be A Buy For Its Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that TCI Express Limited (NSE:TCIEXP) is about to go ex-dividend in just 2 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase TCI Express' shares on or after the 12th of February will not receive the dividend, which will be paid on the 8th of March.

The company's upcoming dividend is ₹3.00 a share, following on from the last 12 months, when the company distributed a total of ₹8.00 per share to shareholders. Looking at the last 12 months of distributions, TCI Express has a trailing yield of approximately 1.1% on its current stock price of ₹750.35. If you buy this business for its dividend, you should have an idea of whether TCI Express's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for TCI Express

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. TCI Express paid out a comfortable 31% of its profit last year. A useful secondary check can be to evaluate whether TCI Express generated enough free cash flow to afford its dividend. It distributed 39% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at TCI Express, with earnings per share up 6.1% on average over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. TCI Express has delivered an average of 22% per year annual increase in its dividend, based on the past eight years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid TCI Express? Earnings per share growth has been growing somewhat, and TCI Express is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but TCI Express is being conservative with its dividend payouts and could still perform reasonably over the long run. It's a promising combination that should mark this company worthy of closer attention.

Wondering what the future holds for TCI Express? See what the 12 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.