Bhageria Industries (NSE:BHAGERIA) Has Announced That It Will Be Increasing Its Dividend To ₹4.00

Bhageria Industries Limited (NSE:BHAGERIA) will increase its dividend on the 29th of August to ₹4.00. This makes the dividend yield 2.3%, which is above the industry average.

Check out our latest analysis for Bhageria Industries

Bhageria Industries' Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Bhageria Industries was paying a whopping 100% as a dividend, but this only made up 25% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS could expand by 7.0% if recent trends continue. If the dividend continues on this path, the payout ratio could be 26% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The dividend has gone from ₹0.13 in 2012 to the most recent annual payment of ₹4.00. This implies that the company grew its distributions at a yearly rate of about 41% over that duration. Bhageria Industries has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

We Could See Bhageria Industries' Dividend Growing

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Bhageria Industries has grown earnings per share at 7.0% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Bhageria Industries' payments are rock solid. While Bhageria Industries is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 3 warning signs for Bhageria Industries that you should be aware of before investing. 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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