Bharat Forge Limited (NSE:BHARATFORG) Looks Interesting, And It's About To Pay A Dividend
Bharat Forge Limited (NSE:BHARATFORG) is about to trade ex-dividend in the next 3 days. You can purchase shares before the 20th of November in order to receive the dividend, which the company will pay on the 5th of December.
Bharat Forge's next dividend payment will be ₹1.50 per share. Last year, in total, the company distributed ₹3.00 to shareholders. Looking at the last 12 months of distributions, Bharat Forge has a trailing yield of approximately 0.7% on its current stock price of ₹436.45. If you buy this business for its dividend, you should have an idea of whether Bharat Forge's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
See our latest analysis for Bharat Forge
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Bharat Forge's payout ratio is modest, at just 25% of profit. A useful secondary check can be to evaluate whether Bharat Forge generated enough free cash flow to afford its dividend. It paid out more than half (63%) of its free cash flow in the past year, which is within an average range for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, Bharat Forge's earnings per share have been growing at 12% a year for the past five years. Bharat Forge has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Bharat Forge has delivered an average of 20% per year annual increase in its dividend, based on the past ten years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Final Takeaway
Is Bharat Forge an attractive dividend stock, or better left on the shelf? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.
Wondering what the future holds for Bharat Forge? See what the 22 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
