J. Kumar Infraprojects Limited (NSE:JKIL) has announced that it will be increasing its dividend from last year's comparable payment on the 24th of October to ₹4.00. Even though the dividend went up, the yield is still quite low at only 0.5%.
See our latest analysis for J. Kumar Infraprojects
J. Kumar Infraprojects' Dividend Is Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, J. Kumar Infraprojects' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 57.1%. If the dividend continues on this path, the payout ratio could be 6.0% 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 2014, the dividend has gone from ₹1.88 total annually to ₹4.00. This works out to be a compound annual growth rate (CAGR) of approximately 7.9% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.
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. J. Kumar Infraprojects has seen EPS rising for the last five years, at 14% per annum. 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.
We Really Like J. Kumar Infraprojects' Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for J. Kumar Infraprojects that investors need to be conscious of moving forward. 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.
About NSEI:JKIL
Very undervalued with flawless balance sheet and pays a dividend.
