SKM Egg Products Export (India) (NSE:SKMEGGPROD) Has Announced That Its Dividend Will Be Reduced To ₹0.50

SKM Egg Products Export (India) Limited's (NSE:SKMEGGPROD) dividend is being reduced from last year's payment covering the same period to ₹0.50 on the 16th of October. This payment takes the dividend yield to 0.7%, which only provides a modest boost to overall returns.

See our latest analysis for SKM Egg Products Export (India)

SKM Egg Products Export (India)'s Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. SKM Egg Products Export (India) is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS could expand by 46.1% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 8.2% by next year, which is in a pretty sustainable range.

SKM Egg Products Export (India)'s Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. The annual payment during the last 7 years was ₹1.00 in 2015, and the most recent fiscal year payment was ₹0.50. Doing the maths, this is a decline of about 9.4% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. We are encouraged to see that SKM Egg Products Export (India) has grown earnings per share at 46% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Our Thoughts On SKM Egg Products Export (India)'s Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We don't think SKM Egg Products Export (India) is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 4 warning signs for SKM Egg Products Export (India) (of which 1 makes us a bit uncomfortable!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.