Bajaj Electricals (NSE:BAJAJELEC) Will Pay A Larger Dividend Than Last Year At ₹4.00

Bajaj Electricals Limited's (NSE:BAJAJELEC) dividend will be increasing from last year's payment of the same period to ₹4.00 on 9th of September. Although the dividend is now higher, the yield is only 0.3%, which is below the industry average.

See our latest analysis for Bajaj Electricals

Bajaj Electricals' Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, Bajaj Electricals was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 133.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 9.8% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ₹2.80 in 2013 to the most recent total annual payment of ₹4.00. This works out to be a compound annual growth rate (CAGR) of approximately 3.6% a year over that time. 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.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Bajaj Electricals has grown earnings per share at 18% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

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. 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.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 10 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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