VLS Finance (NSE:VLSFINANCE) Will Pay A Dividend Of ₹1.50

The board of VLS Finance Limited (NSE:VLSFINANCE) has announced that it will pay a dividend of ₹1.50 per share on the 29th of October. The dividend yield is 0.9% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for VLS Finance

VLS Finance's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, VLS Finance was paying a whopping 105% as a dividend, but this only made up 10% of its overall earnings. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share could rise by 19.8% 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 8.4% by next year, which we think can be pretty sustainable going forward.

VLS Finance Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2017, the annual payment back then was ₹1.00, compared to the most recent full-year payment of ₹1.50. This means that it has been growing its distributions at 7.0% per annum over that time. Investors will likely want to see a longer track record of growth before making decision to add this to their income portfolio.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. It's encouraging to see that VLS Finance has been growing its earnings per share at 20% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for VLS Finance's prospects of growing its dividend payments in the future.

Our Thoughts On VLS Finance'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. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. 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. As an example, we've identified 2 warning signs for VLS Finance that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.