Vita Life Sciences (ASX:VLS) Has Announced A Dividend Of A$0.035

Vita Life Sciences Limited (ASX:VLS) has announced that it will pay a dividend of A$0.035 per share on the 4th of October. This will take the annual payment to 3.9% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Vita Life Sciences

Vita Life Sciences' Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Vita Life Sciences' dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share could rise by 43.4% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 44% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was A$0.04 in 2014, and the most recent fiscal year payment was A$0.09. This means that it has been growing its distributions at 8.4% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Vita Life Sciences has impressed us by growing EPS at 43% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Vita Life Sciences could prove to be a strong dividend payer.

Vita Life Sciences Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 3 warning signs for Vita Life Sciences that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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