The board of Alankit Limited (NSE:ALANKIT) has announced that it will pay a dividend of ₹0.20 per share on the 29th of October. The dividend yield is 1.5% based on this payment, which is a little bit low compared to the other companies in the industry.
Check out our latest analysis for Alankit
Alankit's Earnings Easily Cover The Distributions
If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Alankit was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.
Looking forward, EPS could fall by 8.8% if the company can't turn things around from the last few years. If the dividend continues along recent trends, we estimate the payout ratio could be 37%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Alankit's Dividend Has Lacked Consistency
It's comforting to see that Alankit has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 7 years was ₹0.05 in 2015, and the most recent fiscal year payment was ₹0.20. This implies that the company grew its distributions at a yearly rate of about 22% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.
Dividend Growth Is Doubtful
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Alankit has seen earnings per share falling at 8.8% per year over the last five years. 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.
Our Thoughts On Alankit's Dividend
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Alankit has 5 warning signs (and 1 which is significant) we think 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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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:ALANKIT
Flawless balance sheet slight.
