Vaibhav Global (NSE:VAIBHAVGBL) Is Paying Out A Dividend Of ₹1.50

The board of Vaibhav Global Limited (NSE:VAIBHAVGBL) has announced that it will pay a dividend on the 1st of September, with investors receiving ₹1.50 per share. This means the annual payment is 2.0% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Vaibhav Global

Vaibhav Global's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Vaibhav Global was paying out quite a large proportion of both earnings and cash flow, with the dividend being 108% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we estimate that the payout ratio could reach 26%, which is in a comfortable range for us.

Vaibhav Global's Dividend Has Lacked Consistency

Looking back, Vaibhav Global's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 9 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 20% 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's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Unfortunately, Vaibhav Global's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Vaibhav Global's Dividend Doesn't Look Sustainable

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments are bit high to be considered sustainable, and the track record isn't the best. We don't think Vaibhav Global is a great stock to add to your portfolio if income is your focus.

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. For example, we've identified 2 warning signs for Vaibhav Global (1 can't be ignored!) that you should be aware of before investing. Is Vaibhav Global not quite the opportunity you were looking for? Why not check out our selection of top 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.