Shree Cement's (NSE:SHREECEM) Dividend Will Be Reduced To ₹45.00

Shree Cement Limited's (NSE:SHREECEM) dividend is being reduced to ₹45.00 on the 27th of August. This means that the annual payment is 0.5% of the current stock price, which is lower than what the rest of the industry is paying.

See our latest analysis for Shree Cement

Shree Cement's Dividend Is Well Covered By Earnings

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, Shree Cement's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to fall by 0.5% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 15%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from ₹14.00 in 2012 to the most recent annual payment of ₹90.00. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Shree Cement has grown earnings per share at 11% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Shree 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 Shree Cement has the makings of a solid income stock moving forward. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All in all, this checks a lot of the boxes we look for when choosing an income 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. As an example, we've identified 2 warning signs for Shree Cement that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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