Bandhan Bank (NSE:BANDHANBNK) Has Affirmed Its Dividend Of ₹1.50

Bandhan Bank Limited's (NSE:BANDHANBNK) investors are due to receive a payment of ₹1.50 per share on 19th of September. This payment means the dividend yield will be 0.7%, which is below the average for the industry.

Check out our latest analysis for Bandhan Bank

Bandhan Bank's Payment Expected To Have Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible.

Having paid out dividends for 6 years, Bandhan Bank has a good history of paying out a part of its earnings to shareholders. Using data from its latest earnings report, Bandhan Bank's payout ratio sits at 11%, an extremely comfortable number that shows that it can pay its dividend.

Looking forward, EPS is forecast to rise by 94.3% over the next 3 years. Analysts forecast the future payout ratio could be 12% over the same time horizon, which is a number we think the company can maintain.

Bandhan Bank's Dividend Has Lacked Consistency

Bandhan Bank has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2018, the dividend has gone from ₹1.00 total annually to ₹1.50. This implies that the company grew its distributions at a yearly rate of about 7.0% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's not great to see that Bandhan Bank's earnings per share has fallen at approximately 2.6% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While Bandhan Bank is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 Bandhan Bank that investors should take into consideration. 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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