Indraprastha Gas Limited's (NSE:IGL) dividend will be increasing to ₹3.60 on 28th of October. Despite this raise, the dividend yield of 0.6% is only a modest boost to shareholder returns.
Indraprastha Gas' Dividend Is Well Covered By Earnings
If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Indraprastha Gas was easily earning enough to 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 12.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 19%, which is in the range that makes us comfortable with the sustainability of the dividend.
Indraprastha Gas Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. Since 2011, the first annual payment was ₹1.00, compared to the most recent full-year payment of ₹3.60. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
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. We are encouraged to see that Indraprastha Gas has grown earnings per share at 25% per 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.
Indraprastha Gas Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Indraprastha Gas 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. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 4 Indraprastha Gas analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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