Godrej Agrovet (NSE:GODREJAGRO) Will Pay A Larger Dividend Than Last Year At ₹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 will take the dividend yield to an attractive 1.6%, providing a nice boost to shareholder returns.

See our latest analysis for Godrej Agrovet

Godrej Agrovet's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Godrej Agrovet was quite comfortably earning enough to cover the dividend. 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 91.9%. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which is in the range that makes us comfortable with the sustainability of the dividend.

Godrej Agrovet Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 6 years of history we want to see a few more years of history before making any solid conclusions. Since 2018, the dividend has gone from ₹4.50 total annually to ₹10.00. This means that it has been growing its distributions at 14% per annum over that time. Godrej Agrovet has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. 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 necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On Godrej Agrovet's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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 Godrej Agrovet that investors should take into consideration. 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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