The board of Bliss GVS Pharma Limited (NSE:BLISSGVS) has announced that it will pay a dividend of ₹0.50 per share on the 20th of October. This payment means the dividend yield will be 0.4%, which is below the average for the industry.
Bliss GVS Pharma’s Earnings Easily Cover the Distributions
If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Bliss GVS Pharma was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
EPS is set to fall by 1.8% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could be 6.8%, which we consider to be quite comfortable, with most of the company’s earnings left over to grow the business in the future.
The company’s dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2011, the dividend has gone from ₹0.60 to ₹0.50. Doing the maths, this is a decline of about 1.8% per year. Generally, we don’t like to see a dividend that has been declining over time as this can degrade shareholders’ returns and indicate that the company may be running into problems.
Dividend Growth May Be Hard To Achieve
With a relatively unstable dividend, it’s even more important to see if earnings per share is growing. Unfortunately, Bliss GVS Pharma’s earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.
Overall, it’s nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments haven’t been particularly stable and we don’t see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.
It’s important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we’ve picked out 1 warning sign for Bliss GVS Pharma that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.
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