JK Lakshmi Cement Limited (NSE:JKLAKSHMI) Is About To Go Ex-Dividend, And It Pays A 0.4% Yield

JK Lakshmi Cement Limited (NSE:JKLAKSHMI) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase JK Lakshmi Cement's shares on or after the 21st of February will not receive the dividend, which will be paid on the 9th of March.

The company's next dividend payment will be ₹2.00 per share. Last year, in total, the company distributed ₹4.00 to shareholders. Based on the last year's worth of payments, JK Lakshmi Cement has a trailing yield of 0.4% on the current stock price of ₹963.75. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for JK Lakshmi Cement

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. JK Lakshmi Cement has a low and conservative payout ratio of just 12% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. JK Lakshmi Cement paid out more free cash flow than it generated - 157%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

While JK Lakshmi Cement's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were JK Lakshmi Cement to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see JK Lakshmi Cement has grown its earnings rapidly, up 50% a year for the past five years. Earnings have been growing quickly, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, JK Lakshmi Cement has lifted its dividend by approximately 4.8% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

The Bottom Line

Has JK Lakshmi Cement got what it takes to maintain its dividend payments? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 1 warning sign for JK Lakshmi Cement that you should be aware of before investing in their shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.