Dabur India Limited's (NSE:DABUR) dividend will be increasing to ₹2.50 on 25th of November. Although the dividend is now higher, the yield is only 0.9%, which is below the industry average.
Check out our latest analysis for Dabur India
Dabur India's Earnings Easily Cover the Distributions
If it is predictable over a long period, even low dividend yields can be attractive. Based on the last payment, Dabur India was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.
Over the next year, EPS is forecast to expand by 8.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 56% by next year, which is in a pretty sustainable range.
Dividend Volatility
The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2011, the dividend has gone from ₹1.15 to ₹5.50. This implies that the company grew its distributions at a yearly rate of about 17% 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.
Dabur India Could Grow Its Dividend
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Dabur India has impressed us by growing EPS at 6.8% per year over the past five years. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.
In Summary
Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Dabur India that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list 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.
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About NSEI:DABUR
Excellent balance sheet average dividend payer.
