S H Kelkar and Company Limited (NSE:SHK) Is About To Go Ex-Dividend, And It Pays A 0.9% Yield

Readers hoping to buy S H Kelkar and Company Limited (NSE:SHK) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You will need to purchase shares before the 19th of November to receive the dividend, which will be paid on the 11th of December.

S H Kelkar's next dividend payment will be ₹1.00 per share. Last year, in total, the company distributed ₹1.00 to shareholders. Last year's total dividend payments show that S H Kelkar has a trailing yield of 0.9% on the current share price of ₹117. If you buy this business for its dividend, you should have an idea of whether S H Kelkar's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

View our latest analysis for S H Kelkar

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. S H Kelkar paid out just 19% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether S H Kelkar generated enough free cash flow to afford its dividend. Luckily it paid out just 7.3% of its free cash flow last year.

It's positive to see that S H Kelkar's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that S H Kelkar's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. S H Kelkar has seen its dividend decline 7.8% per annum on average over the past five years, which is not great to see.

Final Takeaway

Has S H Kelkar got what it takes to maintain its dividend payments? Earnings per share have been flat, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend gets cut. All things considered, we are not particularly enthused about S H Kelkar from a dividend perspective.

So while S H Kelkar looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 4 warning signs with S H Kelkar and understanding them should be part of your investment process.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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