Bhageria Industries (NSE:BHAGERIA) shareholders will receive a bigger dividend than last year
Bhageria Industries Limited (NSE:BHAGERIA) will increase its dividend from last year’s comparable payout on August 29 to ₹4.00. This brings the dividend yield to 2.2%, which will delight shareholders.
While the dividend yield is important for income investors, it’s also important to take into account any large changes in share price, as this will generally outweigh any gains from distributions. Bhageria Industries’ share price is down 31% in the past 3 months, which is not ideal for investors and may explain a sharp increase in dividend yield.
Check out our latest analysis for Bhageria Industries
Bhageria Industries revenue easily covers distributions
We like to see strong dividend yields, but that doesn’t matter if the payout isn’t sustainable. Prior to this announcement, Bhageria Industries’ dividend was only 25% of earnings, but it paid 100% of free cash flow. The company may be trying to strike a balance between returning cash to shareholders and reinvesting in the business, but this high payout ratio could certainly force a cut in the dividend if the company runs into a situation. hard.
Going forward, earnings per share could increase by 7.0% over the next year if the trend of recent years continues. Assuming the dividend continues on recent trends, we think the payout ratio could be 26% by next year, which is in a fairly sustainable range.
Although the company has a long history of dividends, it has been cut at least once in the past 10 years. The dividend increased from an annual total of ₹0.125 in 2012 to the most recent total annual payment of ₹4.00. This means that it has increased its distributions by 41% per year during this period. It’s great to see strong growth in dividend payouts, but cuts are concerning as it may indicate that the payout policy is too ambitious.
We could see Bhageria Industries dividend increase
With a relatively volatile dividend, it is even more important to assess whether earnings per share are increasing, which could indicate dividend growth in the future. We are encouraged to see that Bhageria Industries has increased its earnings per share by 7.0% per year over the past five years. EPS growth bodes well for the dividend, as does the low payout ratio the company is currently reporting.
Overall, we still like to see the dividend increase, but we don’t think Bhageria Industries will make a big income stock. With no cash flow, it’s hard to see how the company can sustain a dividend payment. We would be a bit cautious to rely on this stock primarily for dividend income.
Market movements testify to the valuation of a consistent dividend policy over a more unpredictable one. At the same time, there are other factors that our readers should be aware of before investing capital in a stock. For example, we identified 1 warning sign for Bhageria Industries which you should be aware of before investing. If you are a dividend investor, you can also consult our curated list of high yielding dividend stocks.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.