Godrej Agrovet (NSE:GODREJAGRO) Is Due To Pay A Dividend Of ₹9.50

The board of Godrej Agrovet Limited (NSE:GODREJAGRO) has announced that it will pay a dividend of ₹9.50 per share on the 5th of August. Based on this payment, the dividend yield on the company's stock will be 2.2%, which is an attractive boost to shareholder returns.

View our latest analysis for Godrej Agrovet

Godrej Agrovet's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Godrej Agrovet's dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 183.9%. 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.

Godrej Agrovet Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 5 years of history we want to see a few more years of history before making any solid conclusions. Since 2018, the annual payment back then was ₹4.50, compared to the most recent full-year payment of ₹9.50. This means that it has been growing its distributions at 16% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Godrej Agrovet has been growing its earnings per share at 5.5% a year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

In Summary

Overall, a consistent dividend is a good thing, and we think that Godrej Agrovet has the ability to continue this into the future. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 3 warning signs for Godrej Agrovet that investors need to be conscious of moving forward. 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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