Stock Analysis

KCP (NSE:KCP) Is Paying Out A Larger Dividend Than Last Year

NSEI:KCP
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The KCP Limited (NSE:KCP) has announced that it will be increasing its dividend on the 2nd of October to ₹2.00. This takes the dividend yield from 1.3% to 1.3%, which shareholders will be pleased with.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that KCP's stock price has increased by 46% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

View our latest analysis for KCP

KCP's Earnings Easily Cover the Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, KCP'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 11.8% if recent trends continue. If the dividend continues on this path, the payout ratio could be 15% by next year, which we think can be pretty sustainable going forward.

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NSEI:KCP Historic Dividend August 14th 2021

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The first annual payment during the last 10 years was ₹1.00 in 2011, and the most recent fiscal year payment was ₹2.00. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. KCP might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see KCP has been growing its earnings per share at 12% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for KCP's prospects of growing its dividend payments in the future.

KCP Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for KCP that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.
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