VLS Finance Limited (NSE:VLSFINANCE) has announced that it will pay a dividend of ₹1.50 per share on the 30th of October. Including this payment, the dividend yield on the stock will be 1.0%, which is a modest boost for shareholders' returns.
Check out our latest analysis for VLS Finance
VLS Finance's Dividend Is Well Covered By Earnings
If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, VLS Finance was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.
Looking forward, earnings per share could rise by 43.8% 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 1.7% 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. The dividend has gone from an annual total of ₹1.00 in 2017 to the most recent total annual payment of ₹1.50. This means that it has been growing its distributions at 8.4% per annum over that time. 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 could be attracted to the stock based on the quality of its payment history. VLS Finance has seen EPS rising for the last five years, at 44% 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.
VLS Finance Looks Like A Great Dividend Stock
Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Taking the debate a bit further, we've identified 3 warning signs for VLS Finance that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
