S H Kelkar and Company Limited's (NSE:SHK) investors are due to receive a payment of ₹0.75 per share on 9th of September. This payment means the dividend yield will be 0.5%, which is below the average for the industry.
View our latest analysis for S H Kelkar
S H Kelkar's Payment Has Solid Earnings Coverage
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, S H Kelkar's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 36.9%. Assuming the dividend continues along recent trends, we think the payout ratio could be 4.4% by next year, which is in a pretty sustainable range.
S H Kelkar's Dividend Has Lacked Consistency
S H Kelkar 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 2016, the annual payment back then was ₹1.50, compared to the most recent full-year payment of ₹0.75. The dividend has fallen 50% over that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
We Could See S H Kelkar's Dividend Growing
With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. It's encouraging to see that S H Kelkar has been growing its earnings per share at 8.7% a year over the past five years. S H Kelkar definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
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. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, S H Kelkar has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. 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.
About NSEI:SHK
S H Kelkar
Manufactures and supplies fragrances, flavors, and aroma ingredients in India.
Undervalued moderate.
