BCL Industries (NSE:BCLIND) Is Reducing Its Dividend 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 yield is still above the industry average at 1.6%.

See our latest analysis for BCL Industries

BCL Industries' Earnings Easily Cover the Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, BCL Industries' earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

If the trend of the last few years continues, EPS will grow by 38.5% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 14% 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. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2014, the annual payment back then was ₹0.50, compared to the most recent full-year payment of ₹6.00. This means that it has been growing its distributions at 36% 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. It's encouraging to see that BCL Industries has been growing its earnings per share at 38% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On BCL Industries' Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We don't think BCL Industries is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for BCL Industries (of which 1 shouldn't be ignored!) 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.