Jocil (NSE:JOCIL) Is Paying Out Less In Dividends Than Last Year

Jocil Limited (NSE:JOCIL) is reducing its dividend from last year's comparable payment to ₹1.50 on the 19th of October. Despite the cut, the dividend yield of 0.8% will still be comparable to other companies in the industry.

Check out our latest analysis for Jocil

Jocil'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, Jocil's dividend made up quite a large proportion of earnings but only 9.8% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Looking forward, could fall by 11.5% if the company can't turn things around from the last few years. If recent patterns in the dividend continue, we could see the payout ratio reaching 77% in the next 12 months which is on the higher end of the range we would say is sustainable.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ₹6.00 in 2014, and the most recent fiscal year payment was ₹1.50. Dividend payments have fallen sharply, down 75% over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. Over the past five years, it looks as though Jocil's EPS has declined at around 11% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Our Thoughts On Jocil's Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Jocil is a great stock to add to your portfolio if income is your focus.

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. To that end, Jocil has 4 warning signs (and 1 which is potentially serious) we think you should know about. 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.

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