K.P.R. Mill Limited (NSE:KPRMILL) Passed Our Checks, And It's About To Pay A ₹2.50 Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that K.P.R. Mill Limited (NSE:KPRMILL) is about to go ex-dividend in just 3 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, K.P.R. Mill investors that purchase the stock on or after the 15th of July will not receive the dividend, which will be paid on the 21st of August.

The company's upcoming dividend is ₹2.50 a share, following on from the last 12 months, when the company distributed a total of ₹5.00 per share to shareholders. Last year's total dividend payments show that K.P.R. Mill has a trailing yield of 0.6% on the current share price of ₹873.45. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for K.P.R. Mill

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. K.P.R. Mill is paying out just 21% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 43% of its free cash flow in the past year.

It's positive to see that K.P.R. Mill's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see K.P.R. Mill's earnings have been skyrocketing, up 21% per annum for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. K.P.R. Mill has delivered 24% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

From a dividend perspective, should investors buy or avoid K.P.R. Mill? K.P.R. Mill has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. Overall we think this is an attractive combination and worthy of further research.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 1 warning sign for K.P.R. Mill that we recommend you consider before investing in the business.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com