Orient Cement (NSE:ORIENTCEM) Has Announced That Its Dividend Will Be Reduced To ₹0.50

Orient Cement Limited (NSE:ORIENTCEM) has announced that on 6th of September, it will be paying a dividend of₹0.50, which a reduction from last year's comparable dividend. This means that the annual payment is 0.2% of the current stock price, which is lower than what the rest of the industry is paying.

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. Orient Cement's stock price has reduced by 31% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.

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Orient Cement's Projected Earnings Seem Likely To Cover Future Distributions

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, Orient Cement's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Analysts expect a massive rise in earnings per share in the next year. If the dividend extends its recent trend, estimates say the dividend could reach 2.9%, which we would be comfortable to see continuing.

See our latest analysis for Orient Cement

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 ₹1.50 in 2015, and the most recent fiscal year payment was ₹0.50. Dividend payments have fallen sharply, down 67% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Orient Cement May Find It Hard To Grow The Dividend

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Orient Cement hasn't seen much change in its earnings per share over the last five years. While growth may be thin on the ground, Orient Cement could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Orient Cement's Dividend

Even though the dividend was cut this year, we think Orient Cement has the ability to make consistent payments in the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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. As an example, we've identified 1 warning sign for Orient Cement 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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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.