Jocil (NSE:JOCIL) Will Pay A Smaller Dividend Than Last Year

The board of Jocil Limited (NSE:JOCIL) has announced that the dividend on 19th of October will be reduced by 40% from last year's ₹2.50 to ₹1.50. The yield is still above the industry average at 1.3%.

Check out our latest analysis for Jocil

Jocil's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, Jocil was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, could fall by 11.5% if the company can't turn things around from the last few years. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 77%, meaning that most of the company's earnings is being paid out to shareholders.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ₹6.00 in 2014, and the most recent fiscal year payment was ₹2.50. The dividend has shrunk at around 8.4% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. 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.

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. 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. Case in point: We've spotted 4 warning signs for Jocil (of which 1 doesn't sit too well with us!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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.