Vaibhav Global (NSE:VAIBHAVGBL) Has Affirmed Its Dividend Of ₹1.50

Vaibhav Global Limited (NSE:VAIBHAVGBL) has announced that it will pay a dividend of ₹1.50 per share on the 1st of September. Based on this payment, the dividend yield on the company's stock will be 2.0%, which is an attractive boost to shareholder returns.

Check out our latest analysis for Vaibhav Global

Vaibhav Global's Payment Has Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Prior to this announcement, Vaibhav Global's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

EPS is set to fall by 20.3% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 66%, which is comfortable for the company to continue in the future.

Vaibhav Global's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This makes us cautious about the consistency of the dividend over a full economic cycle. The first annual payment during the last 8 years was ₹1.16 in 2014, and the most recent fiscal year payment was ₹6.00. This means that it has been growing its distributions at 23% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Vaibhav Global has grown earnings per share at 30% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Vaibhav Global could prove to be a strong dividend payer.

Our Thoughts On Vaibhav Global's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 3 warning signs for Vaibhav Global (1 is a bit unpleasant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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