BCL Industries (NSE:BCLIND) Will Pay A Smaller Dividend Than Last Year

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. This means the annual payment is 1.7% of the current stock price, which is above the average for the industry.

See our latest analysis for BCL Industries

BCL Industries' Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. BCL Industries is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. 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 33.2% 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 makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 8 years was ₹0.50 in 2014, and the most recent fiscal year payment was ₹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

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. BCL Industries has seen EPS rising for the last five years, at 33% per annum. 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

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While BCL Industries is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

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. 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.

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.