J.K. Cement Limited (NSE:JKCEMENT) has announced that it will pay a dividend of ₹15.00 per share on the 12th of September. This payment means the dividend yield will be 0.6%, which is below the average for the industry.
View our latest analysis for J.K. Cement
J.K. Cement's Earnings Easily Cover the Distributions
If it is predictable over a long period, even low dividend yields can be attractive. J.K. Cement is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.
Over the next year, EPS is forecast to fall by 1.0%. If the dividend continues along recent trends, we estimate the payout ratio could be 20%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from ₹2.00 in 2012 to the most recent annual payment of ₹15.00. This means that it has been growing its distributions at 22% per annum over that time. J.K. Cement has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend Looks Likely To Grow
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. J.K. Cement has impressed us by growing EPS at 28% 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.
In Summary
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While J.K. Cement is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 4 warning signs for J.K. Cement (1 is a bit unpleasant!) that you should be aware of before investing. 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.
About NSEI:JKCEMENT
J.K. Cement
Manufactures and sells cement and its related products under the J.K.
Solid track record with reasonable growth potential and pays a dividend.
