Laxmi Organic Industries (NSE:LXCHEM) Is Increasing Its Dividend 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. Even though the dividend went up, the yield is still quite low at only 0.2%.

See our latest analysis for Laxmi Organic Industries

Laxmi Organic Industries' Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Laxmi Organic Industries was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 135.4%. If the dividend continues on this path, the payout ratio could be 6.1% by next year, which we think can be pretty sustainable going forward.

Laxmi Organic Industries' Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. The dividend has gone from an annual total of ₹0.50 in 2021 to the most recent total annual payment of ₹0.60. This works out to be a compound annual growth rate (CAGR) of approximately 6.3% a year over that time. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

Laxmi Organic Industries Could Grow Its Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Laxmi Organic Industries has impressed us by growing EPS at 8.6% per year over the past five years. Laxmi Organic Industries definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Laxmi Organic Industries' Dividend

Overall, a dividend increase is always good, and we think that Laxmi Organic Industries is a strong income stock thanks to its track record and growing earnings. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 1 warning sign for Laxmi Organic Industries that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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