Orient Cement's (NSE:ORIENTCEM) Dividend Will Be Reduced To ₹0.50

Orient Cement Limited's (NSE:ORIENTCEM) dividend is being reduced by 33% to ₹0.50 per share on 2nd of March, in comparison to last year's comparable payment of ₹0.75. The dividend yield of 2.1% is still a nice boost to shareholder returns, despite the cut.

Check out our latest analysis for Orient Cement

Orient Cement's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Orient Cement's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 21.8% if recent trends continue. If the dividend continues on this path, the payout ratio could be 36% by next year, which we think can be pretty sustainable going forward.

Orient Cement's Dividend Has Lacked Consistency

Orient Cement has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2014, the dividend has gone from ₹1.50 total annually to ₹2.50. This implies that the company grew its distributions at a yearly rate of about 5.8% over that duration. 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.

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 that Orient Cement has been growing its earnings per share at 22% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like Orient Cement's Dividend

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that Orient Cement has the makings of a solid income stock moving forward. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Orient Cement that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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