Bajaj Auto (NSE:BAJAJ-AUTO) Has Announced A Dividend Of ₹140

The board of Bajaj Auto Limited (NSE:BAJAJ-AUTO) has announced that it will pay a dividend on the 30th of July, with investors receiving ₹140 per share. The dividend yield will be 3.8% based on this payment which is still above the industry average.

View our latest analysis for Bajaj Auto

Bajaj Auto's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last payment was quite easily covered by earnings, but it made up 111% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, earnings per share is forecast to fall by 6.3% over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 78% in the next 12 months, which is on the higher end of the range we would say is sustainable.

Bajaj Auto Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the first annual payment was ₹40.00, compared to the most recent full-year payment of ₹140. This means that it has been growing its distributions at 13% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

We Could See Bajaj Auto's Dividend Growing

Investors could be attracted to the stock based on the quality of its payment history. Bajaj Auto has impressed us by growing EPS at 8.6% per year over the past five years. While on an earnings basis, this company looks appealing as an income stock, the cash payout ratio still makes us cautious.

Our Thoughts On Bajaj Auto's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Bajaj Auto that investors should take into consideration. Is Bajaj Auto not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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.