Why You Might Be Interested In V-Guard Industries Limited (NSE:VGUARD) For Its Upcoming Dividend

By
Simply Wall St
Published
July 23, 2021
NSEI:VGUARD
Source: Shutterstock

It looks like V-Guard Industries Limited (NSE:VGUARD) is about to go ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase V-Guard Industries' shares before the 28th of July to receive the dividend, which will be paid on the 27th of August.

The company's next dividend payment will be ₹1.20 per share, and in the last 12 months, the company paid a total of ₹1.20 per share. Looking at the last 12 months of distributions, V-Guard Industries has a trailing yield of approximately 0.5% on its current stock price of ₹250.3. If you buy this business for its dividend, you should have an idea of whether V-Guard Industries's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for V-Guard Industries

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. V-Guard Industries paid out a comfortable 26% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. The good news is it paid out just 0.04% of its free cash flow in the 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 the company's payout ratio, plus analyst estimates of its future dividends.

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NSEI:VGUARD Historic Dividend July 24th 2021

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. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see V-Guard Industries's earnings per share have risen 12% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. V-Guard Industries has delivered 17% dividend growth per year on average over the past 10 years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Should investors buy V-Guard Industries for the upcoming dividend? It's great that V-Guard Industries 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. V-Guard Industries looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in V-Guard Industries for the dividends alone, you should always be mindful of the risks involved. For example - V-Guard Industries has 2 warning signs we think you should be aware of.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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