Avanti Feeds' (NSE:AVANTIFEED) Upcoming Dividend Will Be Larger Than Last Year's

Avanti Feeds Limited (NSE:AVANTIFEED) has announced that it will be increasing its dividend from last year's comparable payment on the 13th of September to ₹9.00. This makes the dividend yield 1.2%, which is above the industry average.

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Avanti Feeds' Projected Earnings Seem Likely To Cover Future Distributions

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, Avanti Feeds' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 14.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 23%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Avanti Feeds

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from ₹1.00 total annually to ₹9.00. This means that it has been growing its distributions at 25% per annum over that time. Avanti Feeds has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

We Could See Avanti Feeds' Dividend Growing

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Avanti Feeds has seen EPS rising for the last five years, at 8.8% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Avanti Feeds' prospects of growing its dividend payments in the future.

Avanti Feeds Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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 picked out 1 warning sign for Avanti Feeds that investors should know about before committing capital to this stock. Is Avanti Feeds 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.