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Triveni Engineering & Industries Limited (NSE:TRIVENI) is reducing its dividend from last year's comparable payment to 1.25 on the 13th of October. This payment takes the dividend yield to 0.6%, which only provides a modest boost to overall returns.

View our latest analysis for Triveni Engineering & Industries

Even a low dividend yield can be attractive if it is sustained for years on end. Triveni Engineering & Industries is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS is forecast to expand by 79.8%. If the dividend continues on this path, the payout ratio could be 25% by next year, which we think can be pretty sustainable going forward.

It's comforting to see that Triveni Engineering & Industries has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the dividend has gone from 0.25 total annually to 2.50. This means that it has been growing its distributions at 39% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Triveni Engineering & Industries has impressed us by growing EPS at 17% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Triveni Engineering & Industries (of which 1 is potentially serious!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Find out whether Triveni Engineering & Industries is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Find out whether Triveni Engineering & Industries is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

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Triveni Engineering & Industries (NSE:TRIVENI) Will Pay A Smaller Dividend Than Last Year - Simply Wall St