J. Kumar Infraprojects' (NSE:JKIL) Dividend Will Be Increased To ₹3.00

The board of J. Kumar Infraprojects Limited (NSE:JKIL) has announced that it will be paying its dividend of ₹3.00 on the 20th of October, an increased payment from last year's comparable dividend. Although the dividend is now higher, the yield is only 0.9%, which is below the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that J. Kumar Infraprojects' stock price has increased by 42% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for J. Kumar Infraprojects

J. Kumar Infraprojects' Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, J. Kumar Infraprojects' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 18.6% if recent trends continue. If the dividend continues on this path, the payout ratio could be 8.1% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2012, the annual payment back then was ₹1.13, compared to the most recent full-year payment of ₹3.00. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

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. It's encouraging to see that J. Kumar Infraprojects has been growing its earnings per share at 19% a year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

J. Kumar Infraprojects Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that J. Kumar Infraprojects is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for J. Kumar Infraprojects that investors should know about before committing capital to this stock. Is J. Kumar Infraprojects not quite the opportunity you were looking for? Why not check out our selection of top 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.