BCL Industries (NSE:BCLIND) Has Announced That It Will Be Increasing Its Dividend To ₹5.00

The board of BCL Industries Limited (NSE:BCLIND) has announced that it will be paying its dividend of ₹5.00 on the 26th of October, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 1.1%, which is fairly typical for the industry.

Check out our latest analysis for BCL Industries

BCL Industries' Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, BCL Industries' earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

If the trend of the last few years continues, EPS will grow by 16.1% over the next 12 months. If the dividend continues on this path, the payout ratio could be 19% by next year, which we think can be pretty sustainable going forward.

BCL Industries' Dividend Has Lacked Consistency

BCL Industries has been paying dividends for a while, but the track record isn't stellar. This suggests that the dividend might not be the most reliable. The annual payment during the last 9 years was ₹0.50 in 2014, and the most recent fiscal year payment was ₹5.00. This implies that the company grew its distributions at a yearly rate of about 29% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's encouraging to see that BCL Industries has been growing its earnings per share at 16% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for BCL Industries' prospects of growing its dividend payments in the future.

Our Thoughts On BCL Industries' Dividend

In summary, while it's always good to see the dividend being raised, we don't think BCL Industries' payments are rock solid. While the low payout ratio is a 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 3 warning signs for BCL Industries (1 can't be ignored!) that you should be aware of before investing. Is BCL Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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