It looks like JK Lakshmi Cement Limited (NSE:JKLAKSHMI) is about to go ex-dividend in the next 3 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Therefore, if you purchase JK Lakshmi Cement's shares on or after the 17th of July, you won't be eligible to receive the dividend, when it is paid on the 29th of August.
The company's next dividend payment will be ₹6.50 per share, on the back of last year when the company paid a total of ₹6.50 to shareholders. Calculating the last year's worth of payments shows that JK Lakshmi Cement has a trailing yield of 1.2% on the current share price of ₹561.25. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. JK Lakshmi Cement has a low and conservative payout ratio of just 20% of its income after tax. A useful secondary check can be to evaluate whether JK Lakshmi Cement generated enough free cash flow to afford its dividend. It paid out 20% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that JK Lakshmi Cement's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Check out our latest analysis for JK Lakshmi Cement
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that JK Lakshmi Cement's earnings are effectively flat over the past five years. We'd take that over an earnings decline any day, but in the long run, the best dividend stocks all grow their earnings per share.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, JK Lakshmi Cement has increased its dividend at approximately 13% a year on average.
To Sum It Up
Is JK Lakshmi Cement worth buying for its dividend? While it's not great to see that earnings per share are effectively flat over the 10-year period we checked, at least the payout ratios are low and conservative. To summarise, JK Lakshmi Cement looks okay on this analysis, although it doesn't appear a stand-out opportunity.
In light of that, while JK Lakshmi Cement has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 1 warning sign for JK Lakshmi Cement you should be aware of.
If you're in the market for strong dividend payers, we recommend checking 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.