Dalmia Bharat Sugar and Industries (NSE:DALMIASUG) Has Affirmed Its Dividend Of ₹1.00

The board of Dalmia Bharat Sugar and Industries Limited (NSE:DALMIASUG) has announced that it will pay a dividend on the 10th of September, with investors receiving ₹1.00 per share. Based on this payment, the dividend yield will be 1.1%, which is fairly typical for the industry.

See our latest analysis for Dalmia Bharat Sugar and Industries

Dalmia Bharat Sugar and Industries' Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, Dalmia Bharat Sugar and Industries' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 83.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 12% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2013, the dividend has gone from ₹0.25 total annually to ₹4.00. This implies that the company grew its distributions at a yearly rate of about 32% 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 Has Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Dalmia Bharat Sugar and Industries has grown earnings per share at 7.5% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

Overall, we think Dalmia Bharat Sugar and Industries is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Dalmia Bharat Sugar and Industries that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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