Ujjivan Small Finance Bank (NSE:UJJIVANSFB) Has Announced That It Will Be Increasing Its Dividend To ₹1.50

Ujjivan Small Finance Bank Limited (NSE:UJJIVANSFB) has announced that it will be increasing its dividend from last year's comparable payment on the 25th of August to ₹1.50. This will take the dividend yield to an attractive 2.2%, providing a nice boost to shareholder returns.

Check out our latest analysis for Ujjivan Small Finance Bank

Ujjivan Small Finance 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.

Currently, Ujjivan Small Finance Bank does not yet have a history of paying dividends out, with this being its first year doing so. Despite Ujjivan Small Finance Bank only paying out for the first time, calculating for the company's payout ratio shows a percentage of 7.9%, a great sign for the sustainability of the company's dividend for the future.

Looking forward, EPS is forecast to rise by 29.7% over the next 3 years. Analysts estimate the future payout ratio will be 17% over the same time period, which is in the range that makes us comfortable with the sustainability of the dividend.

Ujjivan Small Finance Bank Is Still Building Its Track Record

Without a track record of dividend payments, we can't make a judgement on how stable it has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Looks Likely To Grow

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. We are encouraged to see that Ujjivan Small Finance Bank has grown earnings per share at 41% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Ujjivan Small Finance Bank's Dividend

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 in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Ujjivan Small Finance Bank that investors should know about before committing capital to this stock. 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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