Alankit (NSE:ALANKIT) Will Pay A Dividend Of ₹0.20

The board of Alankit Limited (NSE:ALANKIT) has announced that it will pay a dividend on the 29th of October, with investors receiving ₹0.20 per share. This payment means that the dividend yield will be 1.8%, which is around the industry average.

View our latest analysis for Alankit

Alankit's Payment Has Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Alankit was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Unless the company can turn things around, EPS could fall by 8.8% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 37%, which is definitely feasible to continue.

Alankit's Dividend Has Lacked Consistency

Alankit has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. The dividend has gone from an annual total of ₹0.05 in 2015 to the most recent total annual payment of ₹0.20. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth Is Doubtful

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Alankit's EPS has declined at around 8.8% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Alankit is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 4 warning signs for Alankit (of which 1 can't be ignored!) you should know about. Is Alankit not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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