The forthcoming dividend of Balkrishna Industries (NSE: BALKRISIND) will be larger than last year

Balkrishna Industries Limited (NSE: BALKRISIND) has announced that it will increase its dividend on September 5 to 4.00. This results in the dividend yield being 0.8%, which is higher than the industry average.

Check out our latest review for Balkrishna Industries

Balkrishna Industries payment has strong revenue coverage

A high dividend yield for a few years doesn’t mean much if it can’t be sustained. However, based on the last payment, Balkrishna Industries was earning enough to cover the dividend quite comfortably. The company earns enough to make the dividend achievable, but the cash payout ratio of 94% shows that most of the money goes to shareholders, which could constrain future growth prospects.

Next year, EPS is expected to rise 3.0%. If the dividend continues on that path, the payout ratio could be 31% by next year, which we believe may be quite sustainable going forward.

NSEI: BALKRISIND Historic dividend August 11, 2021

Balkrishna Industries has a strong balance sheet

The company has a strong history of paying dividends with very little fluctuation. The dividend went from 0.70 in 2011 to the last annual payment of 20.00. This means that he increased his distributions by 40% per year during this period. Rapidly growing dividends over a long period of time are a very valuable feature for an income stock.

The dividend seems likely to increase

Investors in the company will be happy to receive dividends for some time. It is encouraging to see that Balkrishna Industries has increased its earnings per share by 25% per year over the past five years. Profits grew rapidly and, with a low payout ratio, we think the company could turn out to be a great dividend stock.

In summary

Overall, this is a reasonable dividend, and its increase is an added bonus. On the positive side, the dividend looks sustainable by most measures, but it is held back by the lack of cash flow. It looks like a good dividend stock going forward, but we note that the payout ratio has been at higher levels in the past so it could happen again.

Investors generally tend to favor companies with a consistent and stable dividend policy over those that operate irregularly. However, there are other things for investors to consider when analyzing the performance of stocks. Companies with rising profits tend to be the best long-term dividend-paying stocks. Discover the forecasts of the 8 analysts we follow for Balkrishna Industries free with estimates from public analysts for the company. We have also set up a list of global stocks with a solid dividend.

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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.
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