Genpact (NYSE:G) Is Increasing Its Dividend To $0.17

The board of Genpact Limited (NYSE:G) has announced that it will be paying its dividend of $0.17 on the 26th of March, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 1.2%, which is below the industry average.

See our latest analysis for Genpact

Genpact's Projected Earnings Seem Likely To Cover Future Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Genpact was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 33.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 18%, which is in the range that makes us comfortable with the sustainability of the dividend.

Genpact Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The annual payment during the last 8 years was $0.24 in 2017, and the most recent fiscal year payment was $0.68. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Genpact has seen EPS rising for the last five years, at 13% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Genpact Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Genpact that investors should know about before committing capital to this stock. Is Genpact not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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