Infratil (NZSE:IFT) Has Announced A Dividend Of NZ$0.1325

Infratil Limited (NZSE:IFT) will pay a dividend of NZ$0.1325 on the 2nd of July. The dividend yield of 1.9% is still a nice boost to shareholder returns, despite the cut.

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Infratil's Long-term Dividend Outlook appears Promising

A big dividend yield for a few years doesn't mean much if it can't be sustained. Even though Infratil is not generating a profit, it is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 45%, which makes us pretty comfortable with the sustainability of the dividend.

Check out our latest analysis for Infratil

Infratil Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was NZ$0.125 in 2015, and the most recent fiscal year payment was NZ$0.205. This means that it has been growing its distributions at 5.1% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Company Could Face Some Challenges Growing The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Infratil has seen EPS rising for the last five years, at 28% per annum. Even though the company is not profitable, it is growing at a solid clip. If profitability can be achieved soon and growth continues apace, this stock could certainly turn into a solid dividend payer.

An additional note is that the company has been raising capital by issuing stock equal to 16% of shares outstanding in the last 12 months. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.

The Dividend Could Prove To Be Unreliable

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The payout levels might be a bit high for our liking, but we can't deny that until now, the payments have been pretty consistent. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Infratil has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. Is Infratil not quite the opportunity you were looking for? Why not check out our selection of top 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.