ADF Foods' (NSE:ADFFOODS) Dividend Will Be ₹0.60

ADF Foods Limited (NSE:ADFFOODS) has announced that it will pay a dividend of ₹0.60 per share on the 11th of September. Based on this payment, the dividend yield will be 0.5%, which is lower than the average for the industry.

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ADF Foods' Projected Earnings Seem Likely To Cover Future Distributions

If it is predictable over a long period, even low dividend yields can be attractive. ADF Foods is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. 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 8.1% 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 21% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for ADF Foods

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 ₹0.30 in 2015 to the most recent total annual payment of ₹1.20. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. 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.

ADF Foods Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that ADF Foods has grown earnings per share at 8.1% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for ADF Foods' prospects of growing its dividend payments in the future.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. While ADF Foods is earning enough to cover the payments, the cash flows are lacking. We don't think ADF Foods is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, ADF Foods has 2 warning signs (and 1 which is a bit concerning) we think you should know about. 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.