Berger Paints India (NSE:BERGEPAINT) Has Announced That It Will Be Increasing Its Dividend To ₹3.10

The board of Berger Paints India Limited (NSE:BERGEPAINT) has announced that it will be paying its dividend of ₹3.10 on the 6th of September, 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%.

Check out our latest analysis for Berger Paints India

Berger Paints India's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, Berger Paints India was earning enough to cover the dividend, but free cash flows weren't positive. 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.

Over the next year, EPS is forecast to expand by 48.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 24% by next year, which is in a pretty sustainable range.

Berger Paints India Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ₹0.571 in 2012, and the most recent fiscal year payment was ₹3.10. This means that it has been growing its distributions at 18% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

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. Berger Paints India has seen EPS rising for the last five years, at 15% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Berger Paints India's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Berger Paints India's payments are rock solid. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Berger Paints India that investors need to be conscious of moving forward. 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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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.