Lux Industries' (NSE:LUXIND) Dividend Will Be ₹2.00

Lux Industries Limited (NSE:LUXIND) will pay a dividend of ₹2.00 on the 22nd of October. The dividend yield is 0.2% based on this payment, which is a little bit low compared to the other companies in the industry.

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Lux Industries' Future Dividend Projections Appear Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Lux Industries is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. 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, earnings per share is forecast to rise by 30.1% over the next year. If the dividend continues on this path, the payout ratio could be 3.3% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Lux Industries

Lux Industries' Dividend Has Lacked Consistency

Looking back, Lux Industries' dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of ₹1.20 in 2016 to the most recent total annual payment of ₹2.00. This implies that the company grew its distributions at a yearly rate of about 5.8% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Lux Industries might have put its house in order since then, but we remain cautious.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, Lux Industries' EPS was effectively flat over the past five years, which could stop the company from paying more every year.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Lux Industries' payments, as there could be some issues with sustaining them into the future. While Lux Industries is earning enough to cover the payments, the cash flows are lacking. We don't think Lux Industries is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Are management backing themselves to deliver performance? Check their shareholdings in Lux Industries in our latest insider ownership analysis. 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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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.