Godrej Agrovet (NSE:GODREJAGRO) Is Increasing Its Dividend To ₹10.00

Godrej Agrovet Limited's (NSE:GODREJAGRO) dividend will be increasing from last year's payment of the same period to ₹10.00 on 6th of August. This makes the dividend yield 1.7%, which is above the industry average.

View our latest analysis for Godrej Agrovet

Godrej Agrovet's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Godrej Agrovet's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 97.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 29% by next year, which is in a pretty sustainable range.

Godrej Agrovet Doesn't Have A Long Payment History

Godrej Agrovet's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2018, the annual payment back then was ₹4.50, compared to the most recent full-year payment of ₹9.50. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. 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's Growth Prospects Are Limited

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, Godrej Agrovet's EPS was effectively flat over the past five years, which could stop the company from paying more every year. The company has been growing at a pretty soft 1.9% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

In Summary

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Godrej Agrovet that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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