Vinyl Chemicals (India) (NSE:VINYLINDIA) Is Due To Pay A Dividend Of ₹10.00

The board of Vinyl Chemicals (India) Limited (NSE:VINYLINDIA) has announced that it will pay a dividend of ₹10.00 per share on the 7th of September. The dividend yield will be 2.0% based on this payment which is still above the industry average.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Vinyl Chemicals (India)'s stock price has increased by 47% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

Check out our latest analysis for Vinyl Chemicals (India)

Vinyl Chemicals (India)'s Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Vinyl Chemicals (India) is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share could rise by 25.0% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 47%, which is in the range that makes us comfortable with the sustainability of the dividend.

Vinyl Chemicals (India) Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2013, the dividend has gone from ₹0.80 total annually to ₹10.00. This works out to be a compound annual growth rate (CAGR) of approximately 29% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. It's encouraging to see that Vinyl Chemicals (India) has been growing its earnings per share at 25% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Our Thoughts On Vinyl Chemicals (India)'s Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Vinyl Chemicals (India)'s payments, as there could be some issues with sustaining them into the future. While Vinyl Chemicals (India) is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 3 warning signs for Vinyl Chemicals (India) you should be aware of, and 2 of them shouldn't be ignored. 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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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.