Kamdhenu (NSE:KAMDHENU) Will Pay A Larger Dividend Than Last Year At ₹0.80

Kamdhenu Limited's (NSE:KAMDHENU) dividend will be increasing to ₹0.80 on 27th of October. This takes the annual payment to 0.5% of the current stock price, which unfortunately is below what the industry is paying.

Check out our latest analysis for Kamdhenu

Kamdhenu's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Kamdhenu's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 10.1% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 13%, which is in the range that makes us comfortable with the sustainability of the dividend.

Kamdhenu's Dividend Has Lacked Consistency

It's comforting to see that Kamdhenu has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2012, the first annual payment was ₹0.50, compared to the most recent full-year payment of ₹0.80. This means that it has been growing its distributions at 5.4% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Kamdhenu has grown earnings per share at 10% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Kamdhenu's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 5 warning signs for Kamdhenu you should be aware of, and 1 of them is concerning. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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