Is Trigyn Technologies Limited (NSE:TRIGYN) A Great Dividend Stock?

Simply Wall St

Mon, Sep 2, 2019, 6:24 PM

Is Trigyn Technologies Limited (NSE:TRIGYN) a good dividend stock? How can we tell? Dividend paying companies with growing earnings can be highly rewarding in the long term. If you are hoping to live on your dividends, it's important to be more stringent with your investments than the average punter. Regular readers know we like to apply the same approach to each dividend stock, and we hope you'll find our analysis useful.

Investors might not know much about Trigyn Technologies's dividend prospects, even though it has been paying dividends for the last five years and offers a 1.6% yield. While the yield may not look too great, the relatively long payment history is interesting. Remember that the recent share price drop will make Trigyn Technologies's yield look higher, even though recent events might have impacted the company's prospects. Some simple analysis can reduce the risk of holding Trigyn Technologies for its dividend, and we'll focus on the most important aspects below.

Click the interactive chart for our full dividend analysis

NSEI:TRIGYN Historical Dividend Yield, September 3rd 2019

Payout ratios

Companies (usually) pay dividends out of their earnings. If a company is paying more than it earns, the dividend might have to be cut. So we need to form a view on if a company's dividend is sustainable, relative to its net profit after tax. Trigyn Technologies paid out 4.5% of its profit as dividends, over the trailing twelve month period. Given the low payout ratio, it is hard to envision the dividend coming under threat, barring a catastrophe.

With a strong net cash balance, Trigyn Technologies investors may not have much to worry about in the near term from a dividend perspective.

Remember, you can always get a snapshot of Trigyn Technologies's latest financial position, by checking our visualisation of its financial health.

Dividend Volatility

Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. Trigyn Technologies has been paying a dividend for the past five years. During the past five-year period, the first annual payment was ₹0.50 in 2014, compared to ₹0.75 last year. Dividends per share have grown at approximately 8.4% per year over this time. The dividends haven't grown at precisely 8.4% every year, but this is a useful way to average out the historical rate of growth.

A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Dividend Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share (EPS) are growing - it's not worth taking the risk on a dividend getting cut, unless you might be rewarded with larger dividends in future. It's not great to see that Trigyn Technologies's have fallen at approximately 9.3% over the past five years. A modest decline in earnings per share is not great to see, but it doesn't automatically make a dividend unsustainable. Still, we'd vastly prefer to see EPS growth when researching dividend stocks.

Conclusion

To summarise, shareholders should always check that Trigyn Technologies's dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. First, we like that the company's dividend payments appear well covered, although the retained capital also needs to be effectively reinvested. Unfortunately, the company has not been able to generate earnings per share growth, and cut its dividend at least once in the past. While we're not hugely bearish on it, overall we think there are potentially better dividend stocks than Trigyn Technologies out there.

Are management backing themselves to deliver performance? Check their shareholdings in Trigyn Technologies in our latest insider ownership analysis.

If you are a dividend investor, you might also want to look at our curated list of dividend stocks yielding above 3%.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.

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