K.C.P. Sugar and Industries Corporation Limited (NSE:KCPSUGIND) Pays A ₹0.10 Dividend In Just Three Days

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.C.P. Sugar and Industries Corporation Limited (NSE:KCPSUGIND) is about to go ex-dividend in just three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase K.C.P. Sugar and Industries' shares before the 17th of September in order to receive the dividend, which the company will pay on the 27th of October.

The company's next dividend payment will be ₹0.10 per share. Last year, in total, the company distributed ₹0.10 to shareholders. Based on the last year's worth of payments, K.C.P. Sugar and Industries has a trailing yield of 0.5% on the current stock price of ₹21.7. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether K.C.P. Sugar and Industries has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for K.C.P. Sugar and Industries

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. K.C.P. Sugar and Industries has a low and conservative payout ratio of just 4.8% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. K.C.P. Sugar and Industries paid out more free cash flow than it generated - 172%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

While K.C.P. Sugar and Industries's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Were this to happen repeatedly, this would be a risk to K.C.P. Sugar and Industries's ability to maintain its dividend.

Click here to see how much of its profit K.C.P. Sugar and Industries paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see K.C.P. Sugar and Industries's earnings per share have risen 15% per annum over the last five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. K.C.P. Sugar and Industries's dividend payments per share have declined at 14% per year on average over the past 10 years, which is uninspiring. K.C.P. Sugar and Industries is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

The Bottom Line

Is K.C.P. Sugar and Industries worth buying for its dividend? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

On that note, you'll want to research what risks K.C.P. Sugar and Industries is facing. To help with this, we've discovered 5 warning signs for K.C.P. Sugar and Industries (2 shouldn't be ignored!) that you ought to be aware of before buying the shares.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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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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