Radico Khaitan (NSE:RADICO) Is Due To Pay A Dividend Of ₹3.00

Radico Khaitan Limited's (NSE:RADICO) investors are due to receive a payment of ₹3.00 per share on 27th of October. This means that the annual payment will be 0.2% of the current stock price, which is in line with the average for the industry.

See our latest analysis for Radico Khaitan

Radico Khaitan's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, Radico Khaitan was earning enough to cover the dividend, but free cash flows weren't positive. 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.

Looking forward, earnings per share is forecast to rise by 138.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 8.6%, which is in the range that makes us comfortable with the sustainability of the dividend.

Radico Khaitan Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of ₹0.80 in 2013 to the most recent total annual payment of ₹3.00. This means that it has been growing its distributions at 14% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Radico Khaitan has seen EPS rising for the last five years, at 13% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Radico Khaitan's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Radico Khaitan's payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. 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.