Bank of Baroda (NSE:BANKBARODA) Is Paying Out A Larger Dividend Than Last Year

Bank of Baroda Limited (NSE:BANKBARODA) will increase its dividend from last year's comparable payment on the 4th of August to ₹7.60. This will take the annual payment to 2.7% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Bank of Baroda

Bank of Baroda's Payment Expected To Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained.

Having distributed dividends for at least 10 years, Bank of Baroda has a long history of paying out a part of its earnings to shareholders. Using data from its latest earnings report, Bank of Baroda's payout ratio sits at 21%, an extremely comfortable number that shows that it can pay its dividend.

Looking forward, EPS is forecast to rise by 15.8% over the next 3 years. The future payout ratio could be 21% over that time period, according to analyst estimates, which is a good look for the future of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ₹4.40 in 2014, and the most recent fiscal year payment was ₹7.60. This works out to be a compound annual growth rate (CAGR) of approximately 5.6% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

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. We are encouraged to see that Bank of Baroda has grown earnings per share at 54% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Bank of Baroda's Dividend

Overall, a dividend increase is always good, and we think that Bank of Baroda 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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 instance, we've picked out 1 warning sign for Bank of Baroda 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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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.

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