AVT Natural Products (NSE:AVTNPL) Is Paying Out Less In Dividends Than Last Year

AVT Natural Products Limited (NSE:AVTNPL) has announced it will be reducing its dividend payable on the 15th of March to ₹0.30, which is 25% lower than what investors received last year for the same period. This means that the annual payment will be 1.0% of the current stock price, which is in line with the average for the industry.

See our latest analysis for AVT Natural Products

AVT Natural Products' Dividend Is Well Covered By Earnings

Unless the payments are sustainable, the dividend yield doesn't mean too much. However, prior to this announcement, AVT Natural Products' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 22.1% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 21% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was ₹0.75 in 2014, and the most recent fiscal year payment was ₹1.00. This works out to be a compound annual growth rate (CAGR) of approximately 2.9% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. AVT Natural Products has seen EPS rising for the last five years, at 22% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like AVT Natural Products' Dividend

Overall, we think that AVT Natural Products could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. 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. As an example, we've identified 1 warning sign for AVT Natural Products that you should be aware of before investing. Is AVT Natural Products not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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