Dhampur Bio Organics' (NSE:DBOL) Dividend Is Being Reduced To ₹1.25

Dhampur Bio Organics Limited (NSE:DBOL) is reducing its dividend from last year's comparable payment to ₹1.25 on the 10th of August. The dividend yield of 1.5% is still a nice boost to shareholder returns, despite the cut.

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Estimates Indicate Dhampur Bio Organics' Could Struggle to Maintain Dividend Payments In The Future

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Dhampur Bio Organics' earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

EPS is set to fall by 47.6% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 108%, which could put the dividend in jeopardy if the company's earnings don't improve.

See our latest analysis for Dhampur Bio Organics

Dhampur Bio Organics' Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. Since 2023, the dividend has gone from ₹3.50 total annually to ₹1.25. Dividend payments have fallen sharply, down 64% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Has Limited Growth Potential

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Dhampur Bio Organics' EPS has fallen by approximately 48% per year during the past three years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Dhampur Bio Organics' Dividend Doesn't Look Sustainable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. Case in point: We've spotted 5 warning signs for Dhampur Bio Organics (of which 2 can't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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