Dilip Buildcon (NSE:DBL) Has Announced That It Will Be Increasing Its Dividend To ₹1.00

Dilip Buildcon Limited (NSE:DBL) will increase its dividend from last year's comparable payment on the 24th of October to ₹1.00. This takes the annual payment to 0.2% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for Dilip Buildcon

Dilip Buildcon's Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, Dilip Buildcon was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 77.8%. Assuming the dividend continues along recent trends, we think the payout ratio could be 3.0% by next year, which is in a pretty sustainable range.

Dilip Buildcon's Dividend Has Lacked Consistency

Dilip Buildcon 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 most recent annual payment of ₹1.00 is about the same as the annual payment 7 years ago. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's not great to see that Dilip Buildcon's earnings per share has fallen at approximately 7.8% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Dilip Buildcon will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Dilip Buildcon you should be aware of, and 1 of them is concerning. Is Dilip Buildcon not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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