Dalmia Bharat Sugar and Industries' (NSE:DALMIASUG) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Dalmia Bharat Sugar and Industries Limited (NSE:DALMIASUG) has announced that the dividend on 13th of March will be increased to ₹4.50, which will be 20% higher than last year's payment of ₹3.75 which covered the same period. This takes the dividend yield to 1.5%, which shareholders will be pleased with.

View our latest analysis for Dalmia Bharat Sugar and Industries

Dalmia Bharat Sugar and Industries' Projected Earnings Seem Likely To Cover Future Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Dalmia Bharat Sugar and Industries was easily earning enough to cover the dividend. 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 13.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 18% by next year, which is in a pretty sustainable range.

Dalmia Bharat Sugar and Industries' Dividend Has Lacked Consistency

Looking back, Dalmia Bharat Sugar and Industries' dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2016, the annual payment back then was ₹0.60, compared to the most recent full-year payment of ₹5.00. This implies that the company grew its distributions at a yearly rate of about 27% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Has Growth Potential

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. Dalmia Bharat Sugar and Industries has seen EPS rising for the last five years, at 9.3% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Dalmia Bharat Sugar and Industries Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Dalmia Bharat Sugar and Industries that investors need to be conscious of moving forward. Is Dalmia Bharat Sugar and Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.