Bank of Baroda: 3.7% yield, but NIM is the watch point

Bank of Baroda (NSE: BANKBARODA) paid ₹8.50 per share as dividend in FY26, its highest ever, yielding about 3.7% at ₹231. Net profit hit a record ₹20,021 crore, up 2.2% on the year. What happened Total business grew 13.9% to ₹30,78,366 crore in FY26. Advances rose 16.2% and deposits 12%. Gross NPA fell to a multi-year low of 1.89% from 2.26%. Net NPA improved to 0.45% from 0.58%. Capital adequacy strengthened to 15.82% in FY26 and 16.30% in Q1 FY27. Return on equity was 15.39% and return on assets above 1%. The dividend per share has tripled from ₹2.85 in FY22 to ₹8.50 in FY26, while the payout ratio moved from 19% to 22%. Net profit grew at a 72% CAGR over five years, against only 13% for revenue. Why it matters The bank resumed dividends in FY22 after a four-year hiatus during the NPA cleanup. It now pays 20% to 40% of profit annually. At 22%, there is room to raise the payout. My view The real story is one number: net interest margin fell 19 basis points to 2.89%. Revenue grew 3.8%, profit only 2.2%, because cost-to-income surged 121 basis points to 49.15%. Management guides NIM at 2.75% to 2.95% for FY27. That is a wide band, and the lower end is a concern. Loan growth of 12% to 14% at shrinking margins makes the profit growth story more modest than the headline numbers suggest. At roughly 0.85 times book, the stock is cheaper than any private bank. The 3.7% yield is real and well covered. The question is whether NIM stabilises above 2.85%. What I am watching Q2 FY27 results, NIM trend, and the slippage ratio staying below 1%. On the chart, ₹215 is the 52-week low and ₹333 is the high. My stance: Buy near ₹220 for yield. NIM is the risk to watch. Disclosure: I do not hold a position in Bank of Baroda at the time of writing. This is not investment advice.