Umang Dairies (NSE:UMANGDAIRY) Has Re-Affirmed Its Dividend Of ₹0.50

Umang Dairies Limited's (NSE:UMANGDAIRY) investors are due to receive a payment of ₹0.50 per share on 16th of October. Including this payment, the dividend yield on the stock will be 0.7%, which is a modest boost for shareholders' returns.

Check out our latest analysis for Umang Dairies

Umang Dairies' Distributions May Be Difficult To Sustain

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. While Umang Dairies is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. This gives us some comfort about the level of the dividend payments.

Looking forward, earnings per share could rise by 1.6% over the next year if the trend from the last few years continues. It's nice to see things moving in the right direction, but this probably won't be enough for the company to turn a profit. The healthy cash flows are definitely as good sign, though so we wouldn't panic just yet, especially with the earnings growing.

Umang Dairies' Dividend Has Lacked Consistency

It's comforting to see that Umang Dairies has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The dividend has gone from ₹0.75 in 2013 to the most recent annual payment of ₹0.50. Doing the maths, this is a decline of about 4.9% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Umang Dairies May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Although it's important to note that Umang Dairies' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. Umang Dairies isn't actually turning a profit, which makes it much harder for us to see how they can grow dividends.

Our Thoughts On Umang Dairies' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Umang Dairies (of which 1 is potentially serious!) you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

When trading Umang Dairies or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.