JK Lakshmi Cement's (NSE:JKLAKSHMI) Dividend Is Being Reduced To ₹3.75

JK Lakshmi Cement Limited's (NSE:JKLAKSHMI) dividend is being reduced from last year's payment covering the same period to ₹3.75 on the 23rd of September. The dividend yield will be in the average range for the industry at 0.6%.

Check out our latest analysis for JK Lakshmi Cement

JK Lakshmi Cement'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. JK Lakshmi Cement is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to rise by 136.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 6.2%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ₹2.00 in 2013 to the most recent total annual payment of ₹3.75. This means that it has been growing its distributions at 6.5% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. JK Lakshmi Cement might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. JK Lakshmi Cement has impressed us by growing EPS at 43% 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, the dividend looks like it may have been a bit high, which explains why it has now been cut. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for JK Lakshmi Cement that investors should know about before committing capital to this stock. 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.