Lakshmi Finance & Industrial's (NSE:LFIC) Dividend Will Be Increased To ₹4.00

Lakshmi Finance & Industrial Corporation Limited (NSE:LFIC) will increase its dividend from last year's comparable payment on the 21st of September to ₹4.00. Based on this payment, the dividend yield for the company will be 1.2%, which is fairly typical for the industry.

Check out our latest analysis for Lakshmi Finance & Industrial

Lakshmi Finance & Industrial's Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, Lakshmi Finance & Industrial's earnings easily covered the dividend, but free cash flows were negative. 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 could rise by 75.6% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 6.7% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was ₹1.80, compared to the most recent full-year payment of ₹2.50. This means that it has been growing its distributions at 3.3% per annum over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Lakshmi Finance & Industrial has grown earnings per share at 76% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Our Thoughts On Lakshmi Finance & Industrial's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. Just as an example, we've come across 5 warning signs for Lakshmi Finance & Industrial you should be aware of, and 2 of them can't be ignored. Is Lakshmi Finance & Industrial 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.

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