Bal Pharma Limited (NSE:BALPHARMA) Looks Interesting, And It’s About To Pay A Dividend
Bal Pharma Limited (NSE:BALPHARMA) is about to trade ex-dividend in the next three days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company’s books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company’s books on the record date. In other words, investors can purchase Bal Pharma’s shares before the 17th of September in order to be eligible for the dividend, which will be paid on the 24th of October.
The company’s next dividend payment will be ₹1.20 per share. Last year, in total, the company distributed ₹1.20 to shareholders. Last year’s total dividend payments show that Bal Pharma has a trailing yield of 1.1% on the current share price of ₹107.42. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That’s why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. That’s why it’s good to see Bal Pharma paying out a modest 30% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The good news is it paid out just 16% of its free cash flow in the last year.
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.
Check out our latest analysis for Bal Pharma
Click here to see how much of its profit Bal Pharma paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we’re encouraged by the steady growth at Bal Pharma, with earnings per share up 6.3% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Bal Pharma has delivered 1.8% dividend growth per year on average over the past 10 years.
The Bottom Line
Is Bal Pharma an attractive dividend stock, or better left on the shelf? Earnings per share growth has been growing somewhat, and Bal Pharma is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Bal Pharma is being conservative with its dividend payouts and could still perform reasonably over the long run. There’s a lot to like about Bal Pharma, and we would prioritise taking a closer look at it.
In light of that, while Bal Pharma has an appealing dividend, it’s worth knowing the risks involved with this stock. To that end, you should learn about the 4 warning signs we’ve spotted with Bal Pharma (including 1 which shouldn’t be ignored).
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
Valuation is complex, but we’re here to simplify it.
Discover if Bal Pharma might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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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.
