AVT Natural Products Limited (NSE:AVTNPL) Looks Interesting, And It's About To Pay A Dividend

AVT Natural Products Limited (NSE:AVTNPL) is about to trade ex-dividend in the next 3 days. If you purchase the stock on or after the 15th of September, you won't be eligible to receive this dividend, when it is paid on the 23rd of October.

AVT Natural Products's next dividend payment will be ₹0.35 per share, and in the last 12 months, the company paid a total of ₹0.70 per share. Based on the last year's worth of payments, AVT Natural Products has a trailing yield of 1.6% on the current stock price of ₹43.2. If you buy this business for its dividend, you should have an idea of whether AVT Natural Products's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for AVT Natural Products

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. AVT Natural Products is paying out just 25% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 15% of its cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit AVT Natural Products paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see AVT Natural Products earnings per share are up 6.8% per annum over the last five years. Earnings per share have been growing at a decent rate, and the company is retaining more than three-quarters of its earnings in the business. This is an attractive combination, because when profits are reinvested effectively, growth can compound, with corresponding benefits for earnings and dividends in the future.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, AVT Natural Products has lifted its dividend by approximately 17% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is AVT Natural Products worth buying for its dividend? Earnings per share have been growing moderately, and AVT Natural Products is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but AVT Natural Products is being conservative with its dividend payouts and could still perform reasonably over the long run. AVT Natural Products looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks AVT Natural Products is facing. For example, we've found 2 warning signs for AVT Natural Products that we recommend you consider before investing in the business.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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