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Infosys Ltd's Dividend Analysis

Exploring the Sustainability and Growth of Infosys Ltd's Dividends

Infosys Ltd (NYSE:INFY) recently announced a dividend of $0.34 per share, payable on a date yet to be specified, with the ex-dividend date set for 2024-05-31. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Infosys Ltd's dividend performance and assess its sustainability.

What Does Infosys Ltd Do?

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Infosys is a leading global IT services provider, with nearly 250,000 employees. Based in Bangalore, the Indian IT services firm leverages its offshore outsourcing model to derive 60% of its revenue from North America. The company offers traditional IT services offerings: consulting, managed services and cloud infrastructure services, and business process outsourcing as a service (BPaaS).

Infosys Ltd's Dividend Analysis
Infosys Ltd's Dividend Analysis

A Glimpse at Infosys Ltd's Dividend History

Infosys Ltd has maintained a consistent dividend payment record since 1999. Dividends are currently distributed on a bi-annually basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.

Infosys Ltd's Dividend Analysis
Infosys Ltd's Dividend Analysis

Breaking Down Infosys Ltd's Dividend Yield and Growth

As of today, Infosys Ltd currently has a 12-month trailing dividend yield of 2.54% and a 12-month forward dividend yield of 3.28%, suggesting an expectation of increased dividend payments over the next 12 months.

Over the past three years, Infosys Ltd's annual dividend growth rate was 19.40%. Extended to a five-year horizon, this rate decreased to 17.70% per year. And over the past decade, Infosys Ltd's annual dividends per share growth rate stands at an impressive 17.60%.

Based on Infosys Ltd's dividend yield and five-year growth rate, the 5-year yield on cost of Infosys Ltd stock as of today is approximately 5.74%.

Infosys Ltd's Dividend Analysis
Infosys Ltd's Dividend Analysis

The Sustainability Question: Payout Ratio and Profitability

To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. As of 2024-03-31, Infosys Ltd's dividend payout ratio is 0.57, suggesting a balance between retaining earnings for growth and rewarding shareholders.

Infosys Ltd's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Infosys Ltd's profitability 10 out of 10 as of 2024-03-31, suggesting good profitability prospects. The company has reported positive net income for each year over the past decade, further solidifying its high profitability.

Growth Metrics: The Future Outlook

To ensure the sustainability of dividends, a company must have robust growth metrics. Infosys Ltd's growth rank of 10 out of 10 suggests that the company's growth trajectory is good relative to its competitors.

Revenue is the lifeblood of any company, and Infosys Ltd's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Infosys Ltd's revenue has increased by approximately 17.00% per year on average, a rate that outperforms approximately 68.67% of global competitors.

The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Infosys Ltd's earnings increased by approximately 12.60% per year on average, a rate that outperforms approximately 52.82% of global competitors.

Lastly, the company's 5-year EBITDA growth rate of 12.50%, which outperforms approximately 51.53% of global competitors.

Conclusion

Considering Infosys Ltd's robust dividend payments, impressive growth rates, and strong payout ratio and profitability, the company stands out as a potentially lucrative option for dividend-seeking investors. Will Infosys continue to deliver value to its shareholders with sustainable dividends? Only time will tell, but the indicators certainly point towards a positive trajectory. For those interested in exploring further, GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.

This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.

This article first appeared on GuruFocus.