Kabra Extrusiontechnik's (NSE:KABRAEXTRU) Dividend Will Be Reduced To ₹2.50

Kabra Extrusiontechnik Limited (NSE:KABRAEXTRU) has announced that on 15th of August, it will be paying a dividend of₹2.50, which a reduction from last year's comparable dividend. This means the annual payment is 0.8% of the current stock price, which is above the average for the industry.

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Kabra Extrusiontechnik's Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Kabra Extrusiontechnik was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

If the trend of the last few years continues, EPS will grow by 31.7% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 22%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Kabra Extrusiontechnik

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the annual payment back then was ₹1.50, compared to the most recent full-year payment of ₹2.50. This means that it has been growing its distributions at 5.2% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Kabra Extrusiontechnik might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Kabra Extrusiontechnik has been growing its earnings per share at 32% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Kabra Extrusiontechnik that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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