Readers hoping to buy K.C.P. Sugar and Industries Corporation Limited (NSE:KCPSUGIND) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 30th of August in order to be eligible for this dividend, which will be paid on the 12th of October.
K.C.P. Sugar and Industries's next dividend payment will be ₹0.10 per share, and in the last 12 months, the company paid a total of ₹0.10 per share. Based on the last year's worth of payments, K.C.P. Sugar and Industries stock has a trailing yield of around 0.8% on the current share price of ₹11.6. If you buy this business for its dividend, you should have an idea of whether K.C.P. Sugar and Industries's dividend is reliable and sustainable. So we need to investigate whether K.C.P. Sugar and Industries can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. K.C.P. Sugar and Industries is paying out just 6.9% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. K.C.P. Sugar and Industries paid a dividend despite reporting negative free cash flow over the last twelve months. This may be due to heavy investment in the business, but this is still suboptimal from a dividend sustainability perspective.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're discomforted by K.C.P. Sugar and Industries's 13% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. K.C.P. Sugar and Industries's dividend payments per share have declined at 18% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
To Sum It Up
Should investors buy K.C.P. Sugar and Industries for the upcoming dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. To summarise, K.C.P. Sugar and Industries looks okay on this analysis, although it doesn't appear a stand-out opportunity.
Want to learn more about K.C.P. Sugar and Industries? Here's a visualisation of its historical rate of revenue and earnings growth.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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