Balaji Amines (NSE:BALAMINES) Is Increasing Its Dividend To ₹11.00

The board of Balaji Amines Limited (NSE:BALAMINES) has announced that it will be paying its dividend of ₹11.00 on the 10th of August, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 0.5%.

View our latest analysis for Balaji Amines

Balaji Amines' Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Balaji Amines 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.

The next year is set to see EPS grow by 31.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 16%, which is in the range that makes us comfortable with the sustainability of the dividend.

Balaji Amines Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of ₹0.80 in 2014 to the most recent total annual payment of ₹11.00. This implies that the company grew its distributions at a yearly rate of about 30% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Balaji Amines has impressed us by growing EPS at 12% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Balaji Amines' prospects of growing its dividend payments in the future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Balaji Amines will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Balaji Amines is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Balaji Amines that investors should know about before committing capital to this stock. Is Balaji Amines 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.

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