Divgi TorqTransfer Systems Limited (NSE:DIVGIITTS) recently announced a dividend payment of ₹2.60 on 28th August, which is lower than last year’s dividend. This represents 0.4% of the current stock price, which is below industry standards.
It is important to note that even though the dividend yield is low, it can still be attractive if sustained over time. While Divgi TorqTransfer Systems was able to cover the last dividend payment from earnings, free cash flows were not positive. Cash flow is considered more important than earnings, so caution is advised when relying on the sustainability of this dividend.
Looking ahead, EPS is expected to grow by 102.6% next year. If the dividend continues at this rate, the payout ratio could be 8.1% by next year, which seems sustainable. However, as the company has not been paying dividends for long, it is difficult to assess the stability of future payments.
Divgi TorqTransfer Systems has seen a decline in earnings per share over the past five years, raising concerns about the sustainability of the dividend. While earnings are expected to rise next year, it is important to monitor this trend before getting too optimistic.
In conclusion, while a dividend cut is not ideal, it can lead to a more sustainable payment. Although Divgi TorqTransfer Systems is able to cover its payments with earnings, the lack of positive cash flows raises concerns. Investors may want to consider other income investment opportunities with more stable dividend policies.
It is important to conduct comprehensive analysis before investing in any stock. Simply Wall St provides unbiased commentary based on historical data and analyst forecasts, but it is not intended as financial advice. Investors should consider their own objectives and financial situation before making investment decisions.