Veto Switchgears and Cables (NSE:VETO) Will Pay A Dividend Of ₹1.00

Veto Switchgears and Cables Limited (NSE:VETO) will pay a dividend of ₹1.00 on the 28th of October. This makes the dividend yield 0.9%, which will augment investor returns quite nicely.

Check out our latest analysis for Veto Switchgears and Cables

Veto Switchgears and Cables' Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Veto Switchgears and Cables 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.

Over the next year, EPS could expand by 3.0% if recent trends continue. If the dividend continues on this path, the payout ratio could be 7.1% by next year, which we think can be pretty sustainable going forward.

Veto Switchgears and Cables' Dividend Has Lacked Consistency

It's comforting to see that Veto Switchgears and Cables has been paying a dividend for a number of years now, however it has been cut at least once in that time. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 6 years was ₹1.50 in 2016, and the most recent fiscal year payment was ₹1.00. This works out to be a decline of approximately 6.5% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. However, Veto Switchgears and Cables has only grown its earnings per share at 3.0% per annum over the past five years. While EPS growth is quite low, Veto Switchgears and Cables has the option to increase the payout ratio to return more cash to shareholders.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Veto Switchgears and Cables' payments, as there could be some issues with sustaining them into the future. While Veto Switchgears and Cables is earning enough to cover the payments, the cash flows are lacking. We don't think Veto Switchgears and Cables is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Veto Switchgears and Cables (of which 1 doesn't sit too well with us!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.