TCI Express (NSE:TCIEXP) Will Pay A Dividend Of ₹3.00

TCI Express Limited (NSE:TCIEXP) has announced that it will pay a dividend of ₹3.00 per share on the 30th of November. The dividend yield is 0.4% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for TCI Express

TCI Express' Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. But before making this announcement, TCI Express' earnings quite easily covered the dividend. The business is returning a large chunk of its cash to shareholders, which means it is not being used to grow the business.

If the trend of the last few years continues, EPS will grow by 23.2% over the next 12 months. If the dividend continues on this path, the payout ratio could be 22% by next year, which we think can be pretty sustainable going forward.

TCI Express Is Still Building Its Track Record

It is great to see that TCI Express has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2016, the annual payment back then was ₹1.60, compared to the most recent full-year payment of ₹8.00. This works out to be a compound annual growth rate (CAGR) of approximately 31% a year over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that TCI Express 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.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments TCI Express has been making. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for TCI Express you should be aware of, and 1 of them is concerning. If you are a dividend investor, you might also want to look at our curated 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.