Bal Pharma (NSE:BALPHARMA) Has Announced A Dividend Of ₹1.00

The board of Bal Pharma Limited (NSE:BALPHARMA) has announced that it will pay a dividend on the 19th of October, with investors receiving ₹1.00 per share. Based on this payment, the dividend yield will be 1.0%, which is fairly typical for the industry.

View our latest analysis for Bal Pharma

Bal Pharma'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. However, Bal Pharma's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share could rise by 23.8% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 22% by next year, which we think can be pretty sustainable going forward.

Bal Pharma's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of ₹0.75 in 2013 to the most recent total annual payment of ₹1.00. This implies that the company grew its distributions at a yearly rate of about 3.2% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

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 Bal Pharma has grown earnings per share at 24% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Bal Pharma's Dividend

Overall, we like to see the dividend staying consistent, and we think Bal Pharma might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for Bal Pharma (of which 1 is potentially serious!) you should know about. 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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