Power Grid Corporation of India (NSE:POWERGRID) Has Affirmed Its Dividend Of ₹4.50

The board of Power Grid Corporation of India Limited (NSE:POWERGRID) has announced that it will pay a dividend of ₹4.50 per share on the 5th of March. The dividend yield will be 4.1% based on this payment which is still above the industry average.

Check out our latest analysis for Power Grid Corporation of India

Power Grid Corporation of India's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Power Grid Corporation of India's dividend made up quite a large proportion of earnings but only 31% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Earnings per share is forecast to rise by 14.1% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could reach 80%, which is on the higher side, but certainly still feasible.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ₹1.64 in 2014, and the most recent fiscal year payment was ₹11.31. This implies that the company grew its distributions at a yearly rate of about 21% over that duration. 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.

We Could See Power Grid Corporation of India's Dividend Growing

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Power Grid Corporation of India has impressed us by growing EPS at 9.4% per year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

Power Grid Corporation of India Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Power Grid Corporation of India that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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