Bombay Dyeing and Manufacturing's (NSE:BOMDYEING) Dividend Will Be ₹1.20

The Bombay Dyeing and Manufacturing Company Limited's (NSE:BOMDYEING) investors are due to receive a payment of ₹1.20 per share on 12th of September. This makes the dividend yield 0.9%, which will augment investor returns quite nicely.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

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

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Bombay Dyeing and Manufacturing 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.

Looking forward, earnings per share could rise by 8.3% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 4.7%, which is in the range that makes us comfortable with the sustainability of the dividend.

See our latest analysis for Bombay Dyeing and Manufacturing

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ₹0.80 in 2015 to the most recent total annual payment of ₹1.20. This means that it has been growing its distributions at 4.1% per annum over that time. 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.

Bombay Dyeing and Manufacturing Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Bombay Dyeing and Manufacturing has impressed us by growing EPS at 8.3% per 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.

Our Thoughts On Bombay Dyeing and Manufacturing's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Bombay Dyeing and Manufacturing (of which 1 can't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.