S H Kelkar (NSE:SHK) Is Increasing Its Dividend To ₹2.00

S H Kelkar and Company Limited's (NSE:SHK) periodic dividend will be increasing on the 9th of September to ₹2.00, with investors receiving 167% more than last year's ₹0.75. This takes the annual payment to 0.7% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for S H Kelkar

S H Kelkar's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, S H Kelkar's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Earnings per share is forecast to rise by 48.4% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 79% - on the higher side, but we wouldn't necessarily say this is unsustainable.

S H Kelkar's Dividend Has Lacked Consistency

Looking back, S H Kelkar's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2016, the annual payment back then was ₹1.50, compared to the most recent full-year payment of ₹0.75. Doing the maths, this is a decline of about 9.4% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Come By

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. In the last five years, S H Kelkar's earnings per share has shrunk at approximately 7.0% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Our Thoughts On S H Kelkar's Dividend

In summary, while it's always good to see the dividend being raised, we don't think S H Kelkar's payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

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. Taking the debate a bit further, we've identified 3 warning signs for S H Kelkar that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.