Balkrishna Industries (NSE:BALKRISIND) Will Pay A Dividend Of ₹4.00

Balkrishna Industries Limited (NSE:BALKRISIND) will pay a dividend of ₹4.00 on the 25th of August. This payment means that the dividend yield will be 0.6%, which is around the industry average.

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Balkrishna Industries' Projected Earnings Seem Likely To Cover Future Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Balkrishna Industries was paying a whopping 110% as a dividend, but this only made up 19% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to rise by 44.1% over the next year. If the dividend continues on this path, the payout ratio could be 14% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Balkrishna Industries

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The dividend has gone from an annual total of ₹1.00 in 2015 to the most recent total annual payment of ₹16.00. This works out to be a compound annual growth rate (CAGR) of approximately 32% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Balkrishna Industries has seen EPS rising for the last five years, at 12% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Balkrishna Industries' prospects of growing its dividend payments in the future.

Our Thoughts On Balkrishna Industries' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Balkrishna Industries' payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Balkrishna Industries that investors should take into consideration. Is Balkrishna Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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