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

BCL Industries Limited (NSE:BCLIND) will increase its dividend from last year's comparable payment on the 26th of October to ₹5.00. The payment will take the dividend yield to 1.1%, which is in line with the average 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. BCL Industries is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS could expand by 16.1% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 19% by next year, which is in a pretty sustainable range.

BCL Industries' Dividend Has Lacked Consistency

It's comforting to see that BCL Industries has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2014, the dividend has gone from ₹0.50 total annually to ₹5.00. This means that it has been growing its distributions at 29% per annum over that time. 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

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. BCL Industries has impressed us by growing EPS at 16% per year over the past five years. BCL Industries definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think BCL Industries' payments are rock solid. While BCL Industries is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for BCL Industries (of which 1 makes us a bit uncomfortable!) you should know about. 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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