Zydus Wellness (NSE:ZYDUSWELL) Has Announced A Dividend Of ₹5.00

The board of Zydus Wellness Limited (NSE:ZYDUSWELL) has announced that it will pay a dividend of ₹5.00 per share on the 1st of September. Including this payment, the dividend yield on the stock will be 0.2%, which is a modest boost for shareholders' returns.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Zydus Wellness' stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Zydus Wellness

Zydus Wellness' Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, Zydus Wellness' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 83.6% over the next year. If the dividend continues on this path, the payout ratio could be 6.5% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ₹6.00 in 2014 to the most recent total annual payment of ₹5.00. This works out to be a decline of approximately 1.8% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Zydus Wellness May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, Zydus Wellness' EPS was effectively flat over the past five years, which could stop the company from paying more every year. If Zydus Wellness is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On Zydus Wellness' Dividend

Overall, we think Zydus Wellness is a solid choice as a dividend stock, even though the dividend wasn't raised this year. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 6 Zydus Wellness analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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