SKM Egg Products Export (India)'s (NSE:SKMEGGPROD) Dividend Will Be Increased To ₹1.00

The board of SKM Egg Products Export (India) Limited (NSE:SKMEGGPROD) has announced that it will be increasing its dividend on the 29th of October to ₹1.00. This makes the dividend yield about the same as the industry average at 1.2%.

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

SKM Egg Products Export (India)'s Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, SKM Egg Products Export (India) was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Unless the company can turn things around, EPS could fall by 7.4% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 15%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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

Looking back, SKM Egg Products Export (India)'s dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The last annual payment of ₹1.00 was flat on the first annual payment 6 years ago. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though SKM Egg Products Export (India)'s EPS has declined at around 7.4% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 3 warning signs for SKM Egg Products Export (India) that you should be aware of before investing. We have also put together a list of global stocks with a solid 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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