BCL Industries (NSE:BCLIND) Has Announced That Its Dividend Will Be Reduced To ₹3.00

BCL Industries Limited (NSE:BCLIND) is reducing its dividend from last year's comparable payment to ₹3.00 on the 27th of October. The dividend yield of 1.5% is still a nice boost to shareholder returns, despite the cut.

See our latest analysis for BCL Industries

BCL Industries' Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. 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.

If the trend of the last few years continues, EPS will grow by 38.5% over the next 12 months. If the dividend continues on this path, the payout ratio could be 14% by next year, which we think can be pretty sustainable going forward.

BCL Industries' Dividend Has Lacked Consistency

Looking back, BCL Industries' dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of ₹0.50 in 2014 to the most recent total annual payment of ₹6.00. This works out to be a compound annual growth rate (CAGR) of approximately 36% a year 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. BCL Industries has seen EPS rising for the last five years, at 38% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 is a bit unpleasant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.