Bosch (NSE:BOSCHLTD) Will Pay A Larger Dividend Than Last Year At ₹512.00

Bosch Limited's (NSE:BOSCHLTD) dividend will be increasing from last year's payment of the same period to ₹512.00 on 4th of September. This will take the dividend yield to an attractive 1.6%, providing a nice boost to shareholder returns.

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Bosch's Projected Earnings Seem Likely To Cover Future Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last payment made up 75% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Looking forward, earnings per share is forecast to rise by 52.2% over the next year. If the dividend continues on this path, the payout ratio could be 58% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Bosch

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ₹85.00 in 2015 to the most recent total annual payment of ₹512.00. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Bosch has been growing its earnings per share at 28% a year over the past five years. Fast growing earnings are great, but this can rarely be sustained without some reinvestment into the business, which Bosch hasn't been doing.

Bosch Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an 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. As an example, we've identified 1 warning sign for Bosch that you should be aware of before investing. Is Bosch not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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