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

Bannari Amman Sugars Limited (NSE:BANARISUG) has announced that it will pay a dividend of ₹10.00 per share on the 24th of September. This means the annual payment will be 0.4% of the current stock price, which is lower than the industry average.

See our latest analysis for Bannari Amman Sugars

Bannari Amman Sugars' Payment Has Solid Earnings Coverage

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, Bannari Amman Sugars was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

EPS is set to fall by 5.8% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 13%, 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

The company has a long dividend track record, but it doesn't look great with cuts in the past. The last annual payment of ₹10.00 was flat on the annual payment from10 years ago. 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.

Dividend Growth May Be Hard To Come By

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. In the last five years, Bannari Amman Sugars' earnings per share has shrunk at approximately 5.8% per annum. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.

Bannari Amman Sugars' Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Bannari Amman Sugars is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

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. Taking the debate a bit further, we've identified 2 warning signs for Bannari Amman Sugars that investors need to be conscious of moving forward. 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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