Bannari Amman Sugars (NSE:BANARISUG) Will Pay A Larger Dividend Than Last Year At ₹12.50

Bannari Amman Sugars Limited (NSE:BANARISUG) has announced that it will be increasing its dividend from last year's comparable payment on the 4th of October to ₹12.50. Although the dividend is now higher, the yield is only 0.5%, which is below the industry average.

Check out our latest analysis for Bannari Amman Sugars

Bannari Amman Sugars' Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, Bannari Amman Sugars was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 9.1% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 11%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the annual payment back then was ₹10.00, compared to the most recent full-year payment of ₹12.50. This works out to be a compound annual growth rate (CAGR) of approximately 2.3% a year 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.

We Could See Bannari Amman Sugars' Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Bannari Amman Sugars has grown earnings per share at 9.1% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Bannari Amman Sugars Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Bannari Amman Sugars is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. As an example, we've identified 1 warning sign for Bannari Amman Sugars that you should be aware of before investing. 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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