BSL (NSE:BSL) Will Pay A Larger Dividend Than Last Year At ₹1.50

BSL Limited's (NSE:BSL) dividend will be increasing from last year's payment of the same period to ₹1.50 on 28th of October. This will take the annual payment to 0.9% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for BSL

BSL's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, BSL 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.

If the trend of the last few years continues, EPS will grow by 66.1% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 5.8%, which is in the range that makes us comfortable with the sustainability of the dividend.

BSL's Dividend Has Lacked Consistency

Looking back, BSL's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2014, the dividend has gone from ₹1.00 total annually to ₹1.50. This means that it has been growing its distributions at 4.6% 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.

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 BSL has grown earnings per share at 66% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Our Thoughts On BSL's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While BSL is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for BSL (1 is significant!) that you should be aware of before investing. 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.