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. The dividend yield will be in the average range for the industry at 0.8%.

Check out our latest analysis for Jocil

Jocil's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. The last payment made up 77% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

If the company can't turn things around, EPS could fall by 11.5% over the next year. 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

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the dividend has gone from ₹6.00 total annually to ₹1.50. The dividend has fallen 75% over that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Has Limited Growth Potential

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Jocil's earnings per share has shrunk at 11% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

In Summary

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. 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. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 4 warning signs for Jocil (1 is a bit unpleasant!) that you should be aware of before investing. Is Jocil 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com