Vedant Fashions (NSE:MANYAVAR) Is Reducing Its Dividend To ₹8.50

Vedant Fashions Limited's (NSE:MANYAVAR) dividend is being reduced from last year's payment covering the same period to ₹8.50 on the 29th of September. The dividend yield of 0.7% is still a nice boost to shareholder returns, despite the cut.

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. The last dividend was quite easily covered by Vedant Fashions' earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 56.0% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 45% by next year, which is in a pretty sustainable range.

Vedant Fashions Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. Since 2022, the annual payment back then was ₹5.00, compared to the most recent full-year payment of ₹8.50. This works out to be a compound annual growth rate (CAGR) of approximately 30% a year 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

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that Vedant Fashions has been growing its earnings per share at 17% a year over the past five years. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.

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. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Vedant Fashions that investors should know about before committing capital to this stock. 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.

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