BCL Industries (NSE:BCLIND) Is Reducing Its Dividend To ₹3.00

BCL Industries Limited (NSE:BCLIND) has announced that on 27th of October, it will be paying a dividend of₹3.00, which a reduction from last year's comparable dividend. The yield is still above the industry average at 1.7%.

See our latest analysis for BCL Industries

BCL Industries' Payment Has Solid Earnings Coverage

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

Over the next year, EPS could expand by 33.2% if recent trends continue. 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

BCL Industries has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2014, the annual payment back then was ₹0.50, compared to the most recent full-year payment of ₹6.00. This implies that the company grew its distributions at a yearly rate of about 36% 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

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. BCL Industries has impressed us by growing EPS at 33% per year over the past five years. 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.

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. As an example, we've identified 2 warning signs for BCL Industries 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.