Vaibhav Global (NSE:VAIBHAVGBL) Will Pay 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. The dividend yield will be 1.5% based on this payment which is still above the industry average.

See our latest analysis for Vaibhav Global

Vaibhav Global's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Vaibhav Global's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 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.

Looking forward, earnings per share is forecast to rise by 52.5% over the next year. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 51% which would be quite comfortable going to take the dividend forward.

Vaibhav Global's Dividend Has Lacked Consistency

Looking back, Vaibhav Global's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of ₹1.16 in 2014 to the most recent total annual payment of ₹6.00. This means that it has been growing its distributions at 20% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth May Be Hard To Achieve

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, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Vaibhav Global that investors need to be conscious of moving forward. 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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