Vedant Fashions (NSE:MANYAVAR) Is Paying Out Less In Dividends Than Last Year

Vedant Fashions Limited (NSE:MANYAVAR) has announced that on 29th of September, it will be paying a dividend of₹8.50, which a reduction from last year's comparable dividend. However, the dividend yield of 0.8% is still a decent boost to shareholder returns.

See our latest analysis for Vedant Fashions

Vedant Fashions' Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last payment, Vedant Fashions was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 66.1%. If the dividend continues on this path, the payout ratio could be 42% by next year, which we think can be pretty sustainable going forward.

Vedant Fashions Doesn't Have A Long Payment History

The company has maintained a consistent dividend for a few years now, but we would like to see a longer track record before relying on it. Since 2022, the annual payment back then was ₹5.00, compared to the most recent full-year payment of ₹8.50. This means that it has been growing its distributions at 30% per annum over that time. Vedant Fashions has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Vedant Fashions has impressed us by growing EPS at 17% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

We Really Like Vedant Fashions' Dividend

In general, we don't like to see the dividend being cut, especially when the company has such high potential like Vedant Fashions does. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Vedant Fashions that investors should take into consideration. Is Vedant Fashions not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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