Why You Might Be Interested In BLS International Services Limited (NSE:BLS) For Its Upcoming Dividend

BLS International Services Limited (NSE:BLS) stock is about to trade ex-dividend in 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase BLS International Services' shares before the 9th of September in order to be eligible for the dividend, which will be paid on the 16th of October.

The company's next dividend payment will be ₹1.00 per share, on the back of last year when the company paid a total of ₹1.00 to shareholders. Calculating the last year's worth of payments shows that BLS International Services has a trailing yield of 0.3% on the current share price of ₹367.85. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether BLS International Services can afford its dividend, and if the dividend could grow.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. BLS International Services is paying out just 8.1% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether BLS International Services generated enough free cash flow to afford its dividend. The good news is it paid out just 3.2% of its free cash flow in the last year.

It's positive to see that BLS International Services's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

View our latest analysis for BLS International Services

Click here to see how much of its profit BLS International Services paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see BLS International Services has grown its earnings rapidly, up 61% a year for the past five years. BLS International Services looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past nine years, BLS International Services has increased its dividend at approximately 51% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Should investors buy BLS International Services for the upcoming dividend? BLS International Services has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past nine years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about BLS International Services, and we would prioritise taking a closer look at it.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Case in point: We've spotted 1 warning sign for BLS International Services you should be aware of.

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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.