K.C.P. Sugar and Industries' (NSE:KCPSUGIND) Dividend Will Be ₹0.10

The board of K.C.P. Sugar and Industries Corporation Limited (NSE:KCPSUGIND) has announced that it will pay a dividend of ₹0.10 per share on the 27th of October. This payment means the dividend yield will be 0.5%, which is below the average for the industry.

View our latest analysis for K.C.P. Sugar and Industries

K.C.P. Sugar and Industries' Dividend Is 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. Based on the last payment, K.C.P. Sugar and Industries was paying only paying out a fraction of earnings, but the payment was a massive 172% of cash flows. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

If the trend of the last few years continues, EPS will grow by 14.8% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 3.4% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The first annual payment during the last 10 years was ₹0.45 in 2011, and the most recent fiscal year payment was ₹0.10. This works out to a decline of approximately 78% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. K.C.P. Sugar and Industries has impressed us by growing EPS at 15% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for K.C.P. Sugar and Industries' prospects of growing its dividend payments in the future.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, K.C.P. Sugar and Industries has 5 warning signs (and 2 which are potentially serious) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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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