J.K. Cement Limited (NSE:JKCEMENT) will pay a dividend of ₹15.00 on the 10th of September. Based on this payment, the dividend yield will be 0.5%, which is fairly typical for the industry.
Check out our latest analysis for J.K. Cement
J.K. Cement's Earnings Easily Cover The Distributions
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, J.K. Cement's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.
Looking forward, earnings per share is forecast to rise exponentially over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 9.0%, so there isn't too much pressure on the dividend.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the dividend has gone from ₹5.00 total annually to ₹15.00. This means that it has been growing its distributions at 12% 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.
We Could See J.K. Cement's Dividend Growing
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. J.K. Cement has seen EPS rising for the last five years, at 5.9% per annum. J.K. Cement definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about J.K. Cement's payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. 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 4 warning signs for J.K. Cement that investors need to be conscious of moving forward. Is J.K. Cement not quite the opportunity you were looking for? Why not check out our selection of top 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.
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.
