Kitex Garments (NSE:KITEX) Is Due To Pay A Dividend Of ₹1.50

Kitex Garments Limited (NSE:KITEX) has announced that it will pay a dividend of ₹1.50 per share on the 28th of October. This means the dividend yield will be fairly typical at 0.4%.

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 Kitex Garments' stock price has increased by 83% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Kitex Garments

Kitex Garments' Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Kitex Garments 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.

Looking forward, EPS could fall by 0.07% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 14%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Kitex Garments Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was ₹0.714, compared to the most recent full-year payment of ₹1.50. This means that it has been growing its distributions at 7.7% per annum over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Kitex Garments May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Kitex Garments hasn't seen much change in its earnings per share over the last five years.

Our Thoughts On Kitex Garments' 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 don't think Kitex Garments is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 4 warning signs for Kitex Garments you should be aware of, and 3 of them are a bit unpleasant. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.