Dalmia Bharat (NSE:DALBHARAT) Has Announced A Dividend Of ₹5.00

Dalmia Bharat Limited (NSE:DALBHARAT) will pay a dividend of ₹5.00 on the 28th of July. This means that the annual payment will be 0.5% of the current stock price, which is in line with the average for the industry.

View our latest analysis for Dalmia Bharat

Dalmia Bharat's Earnings Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Dalmia Bharat's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to rise by 108.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 11% by next year, which is in a pretty sustainable range.

Dalmia Bharat's Dividend Has Lacked Consistency

Looking back, Dalmia Bharat's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2019, the dividend has gone from ₹2.00 total annually to ₹9.00. This implies that the company grew its distributions at a yearly rate of about 35% 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.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Dalmia Bharat has grown earnings per share at 23% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Our Thoughts On Dalmia Bharat's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Dalmia Bharat 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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