Should You Buy V.S.T. Tillers Tractors Limited (NSE:VSTTILLERS) For Its Upcoming Dividend?

It looks like V.S.T. Tillers Tractors Limited (NSE:VSTTILLERS) is about to go ex-dividend in the next three days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, V.S.T. Tillers Tractors investors that purchase the stock on or after the 3rd of September will not receive the dividend, which will be paid on the 10th of October.

The company's next dividend payment will be ₹20.00 per share. Last year, in total, the company distributed ₹20.00 to shareholders. Looking at the last 12 months of distributions, V.S.T. Tillers Tractors has a trailing yield of approximately 0.4% on its current stock price of ₹5288.50. If you buy this business for its dividend, you should have an idea of whether V.S.T. Tillers Tractors's dividend is reliable and sustainable. As a result, readers should always check whether V.S.T. Tillers Tractors has been able to grow its dividends, or if the dividend might be cut.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. V.S.T. Tillers Tractors is paying out just 19% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. It distributed 31% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that V.S.T. Tillers Tractors's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Check out our latest analysis for V.S.T. Tillers Tractors

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see V.S.T. Tillers Tractors has grown its earnings rapidly, up 45% a year for the past five years. Earnings per share have been growing very quickly, and the company is paying out a relatively low percentage of its profit and cash flow. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, V.S.T. Tillers Tractors has lifted its dividend by approximately 2.9% a year on average. It's good to see both earnings and the dividend have improved - although the former has been rising much quicker than the latter, possibly due to the company reinvesting more of its profits in growth.

Final Takeaway

Is V.S.T. Tillers Tractors worth buying for its dividend? It's great that V.S.T. Tillers Tractors 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 V.S.T. Tillers Tractors, and we would prioritise taking a closer look at it.

In light of that, while V.S.T. Tillers Tractors has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 2 warning signs for V.S.T. Tillers Tractors that you should be aware of before investing in their shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.