Birlasoft (NSE:BSOFT) Is Due To Pay A Dividend Of ₹4.00

The board of Birlasoft Limited (NSE:BSOFT) has announced that it will pay a dividend on the 5th of September, with investors receiving ₹4.00 per share. The dividend yield will be 1.5% based on this payment which is still above the industry average.

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Birlasoft's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, prior to this announcement, Birlasoft's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 44.4%. Assuming the dividend continues along recent trends, we think the payout ratio could be 28% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Birlasoft

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was ₹1.10, compared to the most recent full-year payment of ₹6.50. This implies that the company grew its distributions at a yearly rate of about 19% over that duration. 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 see if earnings per share is growing. It's encouraging to see that Birlasoft has been growing its earnings per share at 18% a year over the past five years. Birlasoft definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Birlasoft Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. 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. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Birlasoft that you should be aware of before investing. Is Birlasoft not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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