Genus Power Infrastructures Limited (NSE:GENUSPOWER) is about to trade ex-dividend in the next 3 days. Investors can purchase shares before the 29th of August in order to be eligible for this dividend, which will be paid on the 5th of October.
Genus Power Infrastructures's next dividend payment will be ₹0.58 per share, on the back of last year when the company paid a total of ₹0.58 to shareholders. Calculating the last year's worth of payments shows that Genus Power Infrastructures has a trailing yield of 2.8% on the current share price of ₹20.3. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Genus Power Infrastructures can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Genus Power Infrastructures paid out a comfortable 29% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Dividends consumed 55% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're discomforted by Genus Power Infrastructures's 9.1% per annum decline in earnings in the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Genus Power Infrastructures has delivered 19% dividend growth per year on average over the past 10 years.
Has Genus Power Infrastructures got what it takes to maintain its dividend payments? Its earnings per share have been declining meaningfully, although it is paying out less than half its income and more than half its cash flow as dividends. Neither payout ratio appears an immediate concern, but we're concerned about the earnings. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
Want to learn more about Genus Power Infrastructures? Here's a visualisation of its historical rate of revenue and earnings growth.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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