VST Industries (NSE:VSTIND) Has Announced That It Will Be Increasing Its Dividend To ₹140

VST Industries Limited's (NSE:VSTIND) dividend will be increasing to ₹140 on 28th of August. Although the dividend is now higher, the yield is only 4.5%, which is below the industry average.

View our latest analysis for VST Industries

VST Industries' Earnings Easily Cover the Distributions

If it is predictable over a long period, even low dividend yields can be attractive. VST Industries was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

If the trend of the last few years continues, EPS will grow by 16.1% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 65%, which is in the range that makes us comfortable with the sustainability of the dividend.

VST Industries Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from ₹45.00 in 2012 to the most recent annual payment of ₹140. This means that it has been growing its distributions at 12% 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

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. VST Industries has seen EPS rising for the last five years, at 16% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Our Thoughts On VST Industries' Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. However, lack of cash flows makes us wary of the potential for cuts in the dividend's future, even though the dividend is generally looking okay. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so 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 example, we've identified 2 warning signs for VST Industries (1 is concerning!) that you should be aware of before investing. 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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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.