Bank of Baroda (NSE:BANKBARODA) Will Pay A Larger Dividend Than Last Year At ₹5.50

The board of Bank of Baroda (NSE:BANKBARODA) has announced that the dividend on 6th of August will be increased to ₹5.50, which will be 93% higher than last year's payment of ₹2.85 which covered the same period. This takes the dividend yield to 1.6%, which shareholders will be pleased with.

Check out our latest analysis for Bank of Baroda

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

If the payments aren't sustainable, a high yield for a few years won't matter that much.

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 19%, an extremely comfortable number that shows that it can pay its dividend.

Over the next 3 years, EPS is forecast to expand by 53.8%. Analysts forecast the future payout ratio could be 20% over the same time horizon, which is a number we think the company can maintain.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ₹3.40 in 2013 to the most recent total annual payment of ₹2.85. This works out to be a decline of approximately 1.7% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

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. We are encouraged to see that Bank of Baroda has grown earnings per share at 32% 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.

Bank of Baroda Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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.