Jammu and Kashmir Bank (NSE:J&KBANK) Is Due To Pay A Dividend Of ₹2.15

The board of The Jammu and Kashmir Bank Limited (NSE:J&KBANK) has announced that it will pay a dividend of ₹2.15 per share on the 25th of September. The dividend yield will be 2.1% based on this payment which is still above the industry average.

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Jammu and Kashmir Bank's Dividend Forecasted To Be Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable.

Having distributed dividends for at least 10 years, Jammu and Kashmir Bank has a long history of paying out a part of its earnings to shareholders. While past data isn't a guarantee for the future, Jammu and Kashmir Bank's latest earnings report puts its payout ratio at 11%, showing that the company can pay out its dividends comfortably.

Looking forward, earnings per share is forecast to fall by 0.6% over the next year. But assuming the dividend continues along recent trends, we believe the future payout ratio could be 11%, which we are pretty comfortable with and we think would be feasible on an earnings basis.

View our latest analysis for Jammu and Kashmir Bank

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was ₹2.10, compared to the most recent full-year payment of ₹2.15. Dividend payments have been growing, but very slowly over the period. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Jammu and Kashmir Bank has impressed us by growing EPS at 41% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Jammu and Kashmir Bank Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for Jammu and Kashmir Bank you should be aware of, and 1 of them is potentially serious. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.