Tata Communications Limited (NSE:TATACOMM) Pays A ₹17.50 Dividend In Just Three Days
Tata Communications Limited (NSE:TATACOMM) is about to trade ex-dividend in the next 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Tata Communications' shares before the 19th of June in order to receive the dividend, which the company will pay on the 8th of August.
The company's upcoming dividend is ₹17.50 a share, following on from the last 12 months, when the company distributed a total of ₹17.50 per share to shareholders. Based on the last year's worth of payments, Tata Communications has a trailing yield of 0.9% on the current stock price of ₹1966.60. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
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. Tata Communications paid out a comfortable 48% 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. Fortunately, it paid out only 35% of its free cash flow in the past year.
It's positive to see that Tata Communications's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
See our latest analysis for Tata Communications
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. So we're not too excited that Tata Communications's earnings are down 3.6% a year over the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Tata Communications has delivered an average of 12% per year annual increase in its dividend, based on the past 10 years of dividend payments.
Final Takeaway
Is Tata Communications worth buying for its dividend? Tata Communications has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall, it's hard to get excited about Tata Communications from a dividend perspective.
While it's tempting to invest in Tata Communications for the dividends alone, you should always be mindful of the risks involved. Be aware that Tata Communications is showing 3 warning signs in our investment analysis, and 1 of those is a bit unpleasant...
If you're in the market for strong dividend payers, we recommend checking 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.