Kirloskar Ferrous Industries (NSE:KIRLFER) Has Re-Affirmed Its Dividend Of ₹3.00

The board of Kirloskar Ferrous Industries Limited (NSE:KIRLFER) has announced that it will pay a dividend on the 19th of August, with investors receiving ₹3.00 per share. This means the annual payment will be 2.8% of the current stock price, which is lower than the industry average.

Check out our latest analysis for Kirloskar Ferrous Industries

Kirloskar Ferrous Industries' Earnings Easily Cover the Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Kirloskar Ferrous Industries is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share could rise by 31.4% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 21%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from ₹1.00 in 2012 to the most recent annual payment of ₹5.50. This means that it has been growing its distributions at 19% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Kirloskar Ferrous Industries has grown earnings per share at 31% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. 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. Taking the debate a bit further, we've identified 3 warning signs for Kirloskar Ferrous Industries that investors need to be conscious of moving forward. Is Kirloskar Ferrous Industries not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.