The board of S H Kelkar and Company Limited (NSE:SHK) has announced that it will pay a dividend of ₹0.75 per share on the 9th of September. This payment means the dividend yield will be 0.5%, which is below the average for the industry.
See our latest analysis for S H Kelkar
S H Kelkar's Earnings Easily Cover the Distributions
Even a low dividend yield can be attractive if it is sustained for years on end. However, S H Kelkar's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to rise by 36.9% over the next year. If the dividend continues on this path, the payout ratio could be 4.4% by next year, which we think can be pretty sustainable going forward.
S H Kelkar's Dividend Has Lacked Consistency
It's comforting to see that S H Kelkar has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2016, the dividend has gone from ₹1.50 total annually to ₹0.75. The dividend has fallen 50% over that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
We Could See S H Kelkar's Dividend Growing
Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. S H Kelkar has impressed us by growing EPS at 8.7% per year over the past five years. 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.
S H Kelkar Looks Like A Great Dividend Stock
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. 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. To that end, S H Kelkar has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about. Is S H Kelkar not quite the opportunity you were looking for? Why not check out our selection of top 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.
About NSEI:SHK
S H Kelkar
Manufactures and supplies fragrances, flavors, and aroma ingredients in India.
Undervalued moderate.
