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Kitex Garments Limited (NSE:KITEX) has announced that it will pay a dividend of ₹1.50 per share on the 28th of September. This payment means that the dividend yield will be 0.6%, which is around the industry average.
Check out our latest analysis for Kitex Garments
Kitex Garments’ Dividend Is Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn’t mean too much. Based on the last payment, Kitex Garments was earning enough to cover the dividend, but free cash flows weren’t positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
If the trend of the last few years continues, EPS will grow by 8.4% over the next 12 months. If the dividend continues on this path, the payout ratio could be 7.4% by next year, which we think can be pretty sustainable going forward.
Kitex Garments Has A Solid Track Record
The company has an extended history of paying stable dividends. The annual payment during the last 10 years was ₹0.429 in 2012, and the most recent fiscal year payment was ₹1.50. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend Has Growth Potential
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Kitex Garments has impressed us by growing EPS at 8.4% per year over the past five years. Kitex Garments definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Our Thoughts On Kitex Garments’ Dividend
In summary, while it’s good to see that the dividend hasn’t been cut, we are a bit cautious about Kitex Garments’ payments, as there could be some issues with sustaining them into the future. While Kitex Garments is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we’ve come across 2 warning signs for Kitex Garments you should be aware of, and 1 of them is a bit unpleasant. Is Kitex Garments 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.
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