Bosch's (NSE:BOSCHLTD) Dividend Will Be Increased To ₹512.00

Bosch Limited (NSE:BOSCHLTD) has announced that it will be increasing its dividend from last year's comparable payment on the 4th of September to ₹512.00. 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. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

The next year is set to see EPS grow by 47.5%. If the dividend continues on this path, the payout ratio could be 60% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Bosch

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ₹85.00 in 2015, and the most recent fiscal year payment was ₹512.00. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. 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 evaluate if earnings per share is growing, which could point to a growing dividend in the future. Bosch has seen EPS rising for the last five years, at 28% per annum. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Bosch is not retaining those earnings to reinvest in growth.

We Really Like Bosch's Dividend

Overall, a dividend increase is always good, and we think that Bosch is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend 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. For example, we've picked out 1 warning sign for Bosch that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.