Kajaria Ceramics (NSE:KAJARIACER) Has Affirmed Its Dividend Of ₹3.00

Kajaria Ceramics Limited's (NSE:KAJARIACER) investors are due to receive a payment of ₹3.00 per share on 11th of October. This means the annual payment is 0.6% of the current stock price, which is above the average for the industry.

View our latest analysis for Kajaria Ceramics

Kajaria Ceramics' Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Kajaria Ceramics' dividend was only 42% of earnings, however it was paying out 224% of free cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, earnings per share is forecast to rise by 98.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 23% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the annual payment back then was ₹1.50, compared to the most recent full-year payment of ₹9.00. This implies that the company grew its distributions at a yearly rate of about 20% 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.

We Could See Kajaria Ceramics' Dividend Growing

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Kajaria Ceramics has impressed us by growing EPS at 9.4% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On Kajaria Ceramics' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Kajaria Ceramics that investors should take into consideration. 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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