K.P.R. Mill (NSE:KPRMILL) Will Pay A Dividend Of ₹2.50

The board of K.P.R. Mill Limited (NSE:KPRMILL) has announced that it will pay a dividend on the 29th of August, with investors receiving ₹2.50 per share. Based on this payment, the dividend yield will be 0.4%, which is fairly typical for the industry.

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K.P.R. Mill's Future Dividend Projections Appear Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, K.P.R. Mill's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 82.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 14%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for K.P.R. Mill

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ₹0.70 in 2015, and the most recent fiscal year payment was ₹5.00. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. K.P.R. Mill has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend 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. It's encouraging to see that K.P.R. Mill has been growing its earnings per share at 18% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

K.P.R. Mill Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think K.P.R. Mill might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for K.P.R. Mill that investors need to be conscious of moving forward. Is K.P.R. Mill 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.