Laxmi Organic Industries' (NSE:LXCHEM) Dividend Will Be Increased To ₹0.60

Laxmi Organic Industries Limited's (NSE:LXCHEM) dividend will be increasing from last year's payment of the same period to ₹0.60 on 29th of August. Despite this raise, the dividend yield of 0.2% is only a modest boost to shareholder returns.

See our latest analysis for Laxmi Organic Industries

Laxmi Organic Industries' Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Laxmi Organic Industries' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 135.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 6.1%, which is in the range that makes us comfortable with the sustainability of the dividend.

Laxmi Organic Industries' Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The annual payment during the last 3 years was ₹0.50 in 2021, and the most recent fiscal year payment was ₹0.60. This works out to be a compound annual growth rate (CAGR) of approximately 6.3% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

We Could See Laxmi Organic Industries' Dividend Growing

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Laxmi Organic Industries has seen EPS rising for the last five years, at 8.6% per annum. 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 Laxmi Organic Industries' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 1 warning sign for Laxmi Organic Industries that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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