Stock Analysis

Radico Khaitan (NSE:RADICO) Will Pay A Dividend Of ₹3.00

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The board of Radico Khaitan Limited (NSE:RADICO) has announced that it will pay a dividend on the 27th of October, with investors receiving ₹3.00 per share. 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.

View our latest analysis for Radico Khaitan

Radico Khaitan's Earnings Easily Cover The Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Prior to this announcement, Radico Khaitan's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

The next year is set to see EPS grow by 138.8%. 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.

NSEI:RADICO Historic Dividend August 28th 2023

Radico Khaitan Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was ₹0.80 in 2013, and the most recent fiscal year payment was ₹3.00. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Radico Khaitan has impressed us by growing EPS at 13% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

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 Radico Khaitan is earning enough to cover the payments, the cash flows are lacking. We don't think Radico Khaitan is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 6 Radico Khaitan analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Valuation is complex, but we're helping make it simple.

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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.