Vaibhav Global (NSE:VAIBHAVGBL) Will Pay A Dividend Of ₹1.50

Vaibhav Global Limited (NSE:VAIBHAVGBL) will pay a dividend of ₹1.50 on the 31st of August. This makes the dividend yield 1.6%, which will augment investor returns quite nicely.

View our latest analysis for Vaibhav Global

Vaibhav Global Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before this announcement, Vaibhav Global was paying out 76% of earnings, but a comparatively small 43% of free cash flows. This leaves plenty of cash for reinvestment into the business.

EPS is set to fall by 3.9% over the next 12 months if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 97%, which could put the dividend in jeopardy if the company's earnings don't improve.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ₹1.16 in 2014 to the most recent total annual payment of ₹6.00. This works out to be a compound annual growth rate (CAGR) of approximately 18% a year 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.

Dividend Growth May Be Hard To Achieve

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Over the past five years, it looks as though Vaibhav Global's EPS has declined at around 3.9% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth.

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. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Vaibhav Global (1 is potentially serious!) 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.