SKM Egg Products Export (India) (NSE:SKMEGGPROD) Will Pay A Dividend Of ₹0.50

SKM Egg Products Export (India) Limited (NSE:SKMEGGPROD) will pay a dividend of ₹0.50 on the 5th of October. The dividend yield is 0.6% based on this payment, which is a little bit low compared to the other companies in the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that SKM Egg Products Export (India)'s stock price has increased by 113% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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

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

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Before making this announcement, SKM Egg Products Export (India) was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share could rise by 142.2% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 2.7% by next year, which is in a pretty sustainable range.

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

SKM Egg Products Export (India) has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2015, the annual payment back then was ₹1.00, compared to the most recent full-year payment of ₹2.50. This means that it has been growing its distributions at 12% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that SKM Egg Products Export (India) has grown earnings per share at 142% 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.

We Really Like SKM Egg Products Export (India)'s Dividend

Overall, we like to see the dividend staying consistent, and we think SKM Egg Products Export (India) might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for SKM Egg Products Export (India) that investors should take into consideration. 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.