BLS International Services (NSE:BLS) Is Paying Out A Larger Dividend Than Last Year

BLS International Services Limited's (NSE:BLS) dividend will be increasing on the 4th of March to ₹1.00, with investors receiving 300% more than last year. This takes the annual payment to 0.5% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for BLS International Services

BLS International Services' Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, BLS International Services' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 22.6% over the next 12 months. If the dividend continues on this path, the payout ratio could be 13% by next year, which we think can be pretty sustainable going forward.

BLS International Services' Dividend Has Lacked Consistency

Looking back, BLS International Services' dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2017, the first annual payment was ₹0.10, compared to the most recent full-year payment of ₹0.50. This means that it has been growing its distributions at 38% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

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 BLS International Services has grown earnings per share at 23% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

BLS International Services Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that BLS International Services is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for BLS International Services that investors need to be conscious of moving forward. We have also put together a list of global stocks with a solid dividend.

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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.