Balrampur Chini Mills (NSE:BALRAMCHIN) Will Pay A Dividend Of ₹3.00

Balrampur Chini Mills Limited's (NSE:BALRAMCHIN) investors are due to receive a payment of ₹3.00 per share on 11th of December. Including this payment, the dividend yield on the stock will be 0.5%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Balrampur Chini Mills

Balrampur Chini Mills' Future Dividend Projections Seem Positive

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last payment, Balrampur Chini Mills 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.

Over the next year, EPS is forecast to expand by 52.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 8.8% by next year, which is in a pretty sustainable range.

Balrampur Chini Mills' Dividend Has Lacked Consistency

Balrampur Chini Mills has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2017, the annual payment back then was ₹3.50, compared to the most recent full-year payment of ₹3.00. The dividend has shrunk at around 2.2% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend's Growth Prospects Are Limited

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. It's not great to see that Balrampur Chini Mills' earnings per share has fallen at approximately 4.7% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

The Dividend Could Prove To Be Unreliable

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 probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 2 warning signs for Balrampur Chini Mills (of which 1 can't be ignored!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.