JSW Steel's (NSE:JSWSTEEL) Dividend Will Be Reduced To ₹2.80

JSW Steel Limited's (NSE:JSWSTEEL) dividend is being reduced from last year's payment covering the same period to ₹2.80 on the 24th of August. This means that the annual payment is 0.3% of the current stock price, which is lower than what the rest of the industry is paying.

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JSW Steel's Payment Could Potentially Have Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, JSW Steel was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

According to analysts, EPS should be several times higher next year. If the dividend extends its recent trend, estimates say the dividend could reach 4.5%, which we would be comfortable to see continuing.

View our latest analysis for JSW Steel

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ₹1.10 in 2015, and the most recent fiscal year payment was ₹2.80. This means that it has been growing its distributions at 9.8% per annum over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

JSW Steel May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. JSW Steel has seen earnings per share falling at 3.0% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On JSW Steel's Dividend

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. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.

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, JSW Steel has 3 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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