Kansai Nerolac Paints (NSE:KANSAINER) Is Paying Out A Dividend Of ₹3.75

The board of Kansai Nerolac Paints Limited (NSE:KANSAINER) has announced that it will pay a dividend of ₹3.75 per share on the 30th of July. This makes the dividend yield 1.0%, which will augment investor returns quite nicely.

Our free stock report includes 3 warning signs investors should be aware of before investing in Kansai Nerolac Paints. Read for free now.

Kansai Nerolac Paints' Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Kansai Nerolac Paints' 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.

Looking forward, earnings per share is forecast to fall by 28.0% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 37%, which is comfortable for the company to continue in the future.

View our latest analysis for Kansai Nerolac Paints

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ₹0.733 in 2015, and the most recent fiscal year payment was ₹2.50. This works out to be a compound annual growth rate (CAGR) of approximately 13% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Kansai Nerolac Paints has grown earnings per share at 16% 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.

Kansai Nerolac Paints Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

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. To that end, Kansai Nerolac Paints has 3 warning signs (and 1 which doesn't sit too well with us) we think 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.