Indian Bank's (NSE:INDIANB) Upcoming Dividend Will Be Larger Than Last Year's

Indian Bank's (NSE:INDIANB) periodic dividend will be increasing on the 19th of July to ₹8.60, with investors receiving 32% more than last year's ₹6.50. This will take the dividend yield to an attractive 2.3%, providing a nice boost to shareholder returns.

View our latest analysis for Indian Bank

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

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Indian Bank has established itself as a dividend paying company with over 10 years history of distributing earnings to shareholders. 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.

Over the next year, EPS could expand by 10.4% if recent trends continue. Assuming the dividend continues along recent trends, we think the future payout ratio could be 23% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2013, the dividend has gone from ₹7.50 total annually to ₹6.50. Doing the maths, this is a decline of about 1.4% per year. 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. Indian Bank has seen EPS rising for the last five years, at 10% per annum. Indian Bank definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Indian Bank's Dividend

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 of these factors considered, we think this has solid potential as a dividend 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. For example, we've identified 2 warning signs for Indian Bank (1 is a bit concerning!) 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.

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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.