Bosch's (NSE:BOSCHLTD) Shareholders Will Receive A Bigger Dividend Than Last Year

Bosch Limited's (NSE:BOSCHLTD) dividend will be increasing from last year's payment of the same period to ₹280.00 on 31st of August. This makes the dividend yield 3.0%, which is above the industry average.

View our latest analysis for Bosch

Bosch'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. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.

Looking forward, earnings per share is forecast to rise by 62.7% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 72% which would be quite comfortable going to take the dividend forward.

Bosch Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ₹50.00 in 2013, and the most recent fiscal year payment was ₹560.00. This implies that the company grew its distributions at a yearly rate of about 27% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Bosch May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Although it's important to note that Bosch's earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. So the company has struggled to grow its EPS yet it's still paying out 99% of its earnings. Limited recent earnings growth and a high payout ratio makes it hard for us to envision strong future dividend growth, unless the company should have substantial pricing power or some form of competitive advantage.

Bosch's Dividend Doesn't Look Sustainable

Overall, we always like to see the dividend being raised, but we don't think Bosch will make a great income stock. In the past the payments have been stable, but we think the company is paying out too much for this to continue for the long term. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Bosch that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.