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J.K. Cement Limited (NSE:JKCEMENT) stock is about to trade ex-dividend in 3 days time. Ex-dividend means that investors that purchase the stock on or after the 23rd of July will not receive this dividend, which will be paid on the 2nd of September.
J.K. Cement's next dividend payment will be ₹10.00 per share, on the back of last year when the company paid a total of ₹10.00 to shareholders. Looking at the last 12 months of distributions, J.K. Cement has a trailing yield of approximately 1.0% on its current stock price of ₹976.35. If you buy this business for its dividend, you should have an idea of whether J.K. Cement's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
View our latest analysis for J.K. Cement
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see J.K. Cement paying out a modest 27% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It paid out 91% of its free cash flow in the form of dividends last year, which is outside the comfort zone for most businesses. Companies usually need cash more than they need earnings - expenses don't pay themselves - so it's not great to see it paying out so much of its cash flow.
J.K. Cement paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to J.K. Cement's ability to maintain its dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see J.K. Cement has grown its earnings rapidly, up 27% a year for the past five years.
J.K. Cement also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.