Bombay Dyeing and Manufacturing (NSE:BOMDYEING) Is Paying Out A Dividend Of ₹1.20

The Bombay Dyeing and Manufacturing Company Limited (NSE:BOMDYEING) has announced that it will pay a dividend of ₹1.20 per share on the 12th of September. Based on this payment, the dividend yield on the company's stock will be 0.7%, which is an attractive boost to shareholder returns.

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Bombay Dyeing and Manufacturing's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Bombay Dyeing and Manufacturing is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS could expand by 8.3% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 4.9% by next year, which is in a pretty sustainable range.

See our latest analysis for Bombay Dyeing and Manufacturing

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from ₹0.80 total annually to ₹1.20. This works out to be a compound annual growth rate (CAGR) of approximately 4.1% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Bombay Dyeing and Manufacturing Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that Bombay Dyeing and Manufacturing has been growing its earnings per share at 8.3% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Bombay Dyeing and Manufacturing's prospects of growing its dividend payments in the future.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 3 warning signs for Bombay Dyeing and Manufacturing (1 doesn't sit too well with us!) that you should be aware of before investing. Is Bombay Dyeing and Manufacturing not quite the opportunity you were looking for? Why not check out our selection of top 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.