Indian Bank (NSE:INDIANB) Is Paying Out A Larger Dividend Than Last Year

Indian Bank (NSE:INDIANB) has announced that it will be increasing its dividend from last year's comparable payment on the 15th of July to ₹12.00. This will take the annual payment to 2.1% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Indian Bank

Indian Bank's Earnings Will Easily Cover The Distributions

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

Indian Bank has a long history of paying out dividends, with its current track record at a minimum of 10 years. Using data from its latest earnings report, Indian Bank's payout ratio sits at 19%, an extremely comfortable number that shows that it can pay its dividend.

Looking forward, EPS is forecast to rise by 28.9% over the next 3 years. The future payout ratio could be 20% 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. Since 2014, the dividend has gone from ₹6.60 total annually to ₹12.00. This means that it has been growing its distributions at 6.2% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Indian Bank might have put its house in order since then, but we remain 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. It's encouraging to see that Indian Bank has been growing its earnings per share at 51% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Indian Bank Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Indian Bank is a strong income stock thanks to its track record and growing earnings. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Indian Bank that you should be aware of before investing. Is Indian Bank not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.