Dilip Buildcon (NSE:DBL) Will Pay A Larger Dividend Than Last Year At ₹1.00

Dilip Buildcon Limited's (NSE:DBL) dividend will be increasing from last year's payment of the same period to ₹1.00 on 24th of October. Despite this raise, the dividend yield of 0.2% is only a modest boost to shareholder returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Dilip Buildcon's stock price has increased by 39% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Dilip Buildcon

Dilip Buildcon's Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. 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.

The next year is set to see EPS grow by 77.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 3.0%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dilip Buildcon's Dividend Has Lacked Consistency

Looking back, Dilip Buildcon's dividend hasn't been particularly consistent. 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. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Dilip Buildcon has seen earnings per share falling at 7.8% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

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 Dilip Buildcon is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for Dilip Buildcon (of which 1 can't be ignored!) you should know about. 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.