Power Grid Corporation of India (NSE:POWERGRID) Is Paying Out Less In Dividends Than Last Year

Power Grid Corporation of India Limited (NSE:POWERGRID) has announced that on 25th of September, it will be paying a dividend of₹1.25, which a reduction from last year's comparable dividend. Despite the cut, the dividend yield of 3.1% will still be comparable to other companies in the industry.

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Power Grid Corporation of India's Projected Earnings Seem Likely To Cover Future Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. The last dividend was quite easily covered by Power Grid Corporation of India's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 23.6%. If the dividend continues on this path, the payout ratio could be 51% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Power Grid Corporation of India

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was ₹1.45, compared to the most recent full-year payment of ₹9.00. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. 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 Has Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Power Grid Corporation of India has been growing its earnings per share at 7.8% a year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Our Thoughts On Power Grid Corporation of India's Dividend

Overall, while it's not great to see that the dividend has been cut, we think the company is now in a good position to make consistent payments going into the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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 identified 2 warning signs for Power Grid Corporation of India (1 can't be ignored!) that you should be aware of before investing. 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.