Bannari Amman Sugars (NSE:BANARISUG) Has Announced A Dividend Of ₹10.00

The board of Bannari Amman Sugars Limited (NSE:BANARISUG) has announced that it will pay a dividend on the 9th of October, with investors receiving ₹10.00 per share. Including this payment, the dividend yield on the stock will be 0.4%, which is a modest boost for shareholders' returns.

View our latest analysis for Bannari Amman Sugars

Bannari Amman Sugars' Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, Bannari Amman Sugars 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.

Unless the company can turn things around, EPS could fall by 12.6% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 18%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The last annual payment of ₹10.00 was flat on the annual payment from10 years ago. 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.

Dividend Growth Potential Is Shaky

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Bannari Amman Sugars' earnings per share has shrunk at 13% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Bannari Amman Sugars' payments, as there could be some issues with sustaining them into the future. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

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. For example, we've identified 4 warning signs for Bannari Amman Sugars (2 are a bit unpleasant!) that you should be aware of before investing. Is Bannari Amman Sugars not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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