VLS Finance Limited (NSE:VLSFINANCE) will pay a dividend of ₹1.50 on the 29th of October. This means the annual payment will be 0.9% of the current stock price, which is lower than the industry average.
View our latest analysis for VLS Finance
VLS Finance's Earnings Easily Cover The Distributions
Even a low dividend yield can be attractive if it is sustained for years on end. Based on the last payment, VLS Finance was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.
Looking forward, earnings per share could rise by 38.3% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 3.6% by next year, which we think can be pretty sustainable going forward.
VLS Finance Doesn't Have A Long Payment History
It is great to see that VLS Finance has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2017, the annual payment back then was ₹1.00, compared to the most recent full-year payment of ₹1.50. This implies that the company grew its distributions at a yearly rate of about 7.0% over that duration. VLS Finance has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. VLS Finance has seen EPS rising for the last five years, at 38% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
Our Thoughts On VLS Finance's Dividend
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about VLS Finance's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think VLS Finance 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for VLS Finance that investors should know about before committing capital to this stock. Is VLS Finance 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.
About NSEI:VLSFINANCE
Excellent balance sheet with proven track record.
