Vidhi Specialty Food Ingredients (NSE:VIDHIING) Could Be A Buy For Its Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Vidhi Specialty Food Ingredients Limited (NSE:VIDHIING) is about to go ex-dividend in just 2 days. This means that investors who purchase shares on or after the 20th of August will not receive the dividend, which will be paid on the 13th of September.

Vidhi Specialty Food Ingredients's next dividend payment will be ₹0.20 per share, and in the last 12 months, the company paid a total of ₹1.00 per share. Last year's total dividend payments show that Vidhi Specialty Food Ingredients has a trailing yield of 1.2% on the current share price of ₹86.1. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Vidhi Specialty Food Ingredients has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Vidhi Specialty Food Ingredients

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Vidhi Specialty Food Ingredients has a low and conservative payout ratio of just 15% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 22% of its cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Vidhi Specialty Food Ingredients paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see Vidhi Specialty Food Ingredients's earnings have been skyrocketing, up 21% per annum for the past five years. Vidhi Specialty Food Ingredients earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, eight years ago, Vidhi Specialty Food Ingredients has lifted its dividend by approximately 22% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

The Bottom Line

Is Vidhi Specialty Food Ingredients worth buying for its dividend? It's great that Vidhi Specialty Food Ingredients is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Vidhi Specialty Food Ingredients, and we would prioritise taking a closer look at it.

While it's tempting to invest in Vidhi Specialty Food Ingredients for the dividends alone, you should always be mindful of the risks involved. Our analysis shows 3 warning signs for Vidhi Specialty Food Ingredients and you should be aware of them before buying any shares.

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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This article by Simply Wall St is general in nature. 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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