Stock Analysis

Radico Khaitan (NSE:RADICO) Has Affirmed Its Dividend Of ₹3.00

NSEI:RADICO
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The board of Radico Khaitan Limited (NSE:RADICO) has announced that it will pay a dividend on the 28th of October, with investors receiving ₹3.00 per share. Including this payment, the dividend yield on the stock will be 0.2%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Radico Khaitan

Radico Khaitan's Payment Has Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Radico Khaitan's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 37.6%. If the dividend continues on this path, the payout ratio could be 15% by next year, which we think can be pretty sustainable going forward.

historic-dividend
NSEI:RADICO Historic Dividend August 6th 2023

Radico Khaitan Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of ₹0.80 in 2013 to the most recent total annual payment of ₹3.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Radico Khaitan has impressed us by growing EPS at 13% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Radico Khaitan's prospects of growing its dividend payments in the future.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While Radico Khaitan is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 6 analysts we track are forecasting for Radico Khaitan for free with public analyst estimates for the company. Is Radico Khaitan not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.