Bajaj Electricals (NSE:BAJAJELEC) Has Announced That It Will Be Increasing Its Dividend To ₹4.00

The board of Bajaj Electricals Limited (NSE:BAJAJELEC) has announced that the dividend on 9th of September will be increased to ₹4.00, which will be 33% higher than last year's payment of ₹3.00 which covered the same period. Even though the dividend went up, the yield is still quite low at only 0.3%.

Check out our latest analysis for Bajaj Electricals

Bajaj Electricals' 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. Before making this announcement, Bajaj Electricals was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 147.3%. If the dividend continues on this path, the payout ratio could be 11% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was ₹2.80, compared to the most recent full-year payment of ₹3.00. Its dividends have grown at less than 1% per annum over this time frame. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Bajaj Electricals has impressed us by growing EPS at 18% per year over the past five years. Bajaj Electricals definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Bajaj Electricals' Dividend

Overall, a dividend increase is always good, and we think that Bajaj Electricals is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Earnings growth generally bodes well for the future value of company dividend payments. See if the 8 Bajaj Electricals analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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