Kakatiya Cement Sugar and Industries (NSE:KAKATCEM) Has Affirmed Its Dividend Of ₹3.00

Kakatiya Cement Sugar and Industries Limited's (NSE:KAKATCEM) investors are due to receive a payment of ₹3.00 per share on 8th of October. Based on this payment, the dividend yield on the company's stock will be 1.4%, which is an attractive boost to shareholder returns.

See our latest analysis for Kakatiya Cement Sugar and Industries

Kakatiya Cement Sugar and Industries' Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Kakatiya Cement Sugar and Industries' earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, EPS could fall by 7.7% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 13%, which is definitely feasible to continue.

Kakatiya Cement Sugar and Industries Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of ₹2.70 in 2012 to the most recent total annual payment of ₹3.00. This works out to be a compound annual growth rate (CAGR) of approximately 1.1% a year over that time. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.

Dividend Growth Is Doubtful

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Kakatiya Cement Sugar and Industries has seen earnings per share falling at 7.7% 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.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Case in point: We've spotted 3 warning signs for Kakatiya Cement Sugar and Industries (of which 1 is concerning!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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

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.