LT Foods (NSE:DAAWAT) Has Re-Affirmed Its Dividend Of ₹0.50

LT Foods Limited (NSE:DAAWAT) will pay a dividend of ₹0.50 on the 28th of November. Based on this payment, the dividend yield will be 1.4%, which is fairly typical for the industry.

See our latest analysis for LT Foods

LT Foods' Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. However, LT Foods' earnings easily cover the dividend. 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 24.2% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 12% by next year, which is in a pretty sustainable range.

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 first annual payment during the last 10 years was ₹0.10 in 2011, and the most recent fiscal year payment was ₹1.00. This works out to be a compound annual growth rate (CAGR) of approximately 26% a year over that time. 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.

The Dividend Looks Likely To Grow

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. It's encouraging to see LT Foods has been growing its earnings per share at 24% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

LT Foods Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think LT Foods might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

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. For instance, we've picked out 2 warning signs for LT Foods that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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.

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