DCB Bank (NSE:DCBBANK) Is Increasing Its Dividend To ₹1.25

DCB Bank Limited (NSE:DCBBANK) will increase its dividend from last year's comparable payment on the 22nd of July to ₹1.25. This makes the dividend yield about the same as the industry average at 1.1%.

See our latest analysis for DCB Bank

DCB Bank's Dividend Forecasted To Be Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue.

Having paid out dividends for 6 years, DCB Bank has a good history of paying out a part of its earnings to shareholders. While past data isn't a guarantee for the future, DCB Bank's latest earnings report puts its payout ratio at 8.4%, showing that the company can pay out its dividends comfortably.

Over the next 3 years, EPS is forecast to expand by 72.1%. Analysts forecast the future payout ratio could be 8.5% over the same time horizon, which is a number we think the company can maintain.

DCB Bank's Dividend Has Lacked Consistency

DCB Bank has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 6 years was ₹0.50 in 2017, and the most recent fiscal year payment was ₹1.25. This works out to be a compound annual growth rate (CAGR) of approximately 16% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

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. DCB Bank has impressed us by growing EPS at 13% per year over the past five years. DCB Bank definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

DCB Bank Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for DCB Bank you should be aware of, and 1 of them is significant. Is DCB Bank not quite the opportunity you were looking for? Why not check out our selection of top 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.