Everest Kanto Cylinder (NSE:EKC) Has Affirmed Its Dividend Of ₹0.70

Everest Kanto Cylinder Limited's (NSE:EKC) investors are due to receive a payment of ₹0.70 per share on 22nd 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.

Check out our latest analysis for Everest Kanto Cylinder

Everest Kanto Cylinder's Payment Has Solid Earnings Coverage

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, Everest Kanto Cylinder 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 is forecast to rise by 47.2% over the next year. If the dividend continues on this path, the payout ratio could be 9.9% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the dividend has gone from ₹0.20 total annually to ₹0.70. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year 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's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. However, Everest Kanto Cylinder has only grown its earnings per share at 2.2% per annum over the past five years. If Everest Kanto Cylinder is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

Overall, a consistent dividend is a good thing, and we think that Everest Kanto Cylinder has the ability to continue this into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 3 warning signs for Everest Kanto Cylinder that investors need to be conscious of moving forward. 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.