Advanced Enzyme Technologies (NSE:ADVENZYMES) Is Due To Pay A Dividend Of ₹1.20

The board of Advanced Enzyme Technologies Limited (NSE:ADVENZYMES) has announced that it will pay a dividend of ₹1.20 per share on the 29th of August. This will take the annual payment to 1.6% of the stock price, which is above what most companies in the industry pay.

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Advanced Enzyme Technologies' Payment Could Potentially Have Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Advanced Enzyme Technologies' dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 0.2% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 56% by next year, which is in a pretty sustainable range.

See our latest analysis for Advanced Enzyme Technologies

Advanced Enzyme Technologies Is Still Building Its Track Record

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. Since 2017, the dividend has gone from ₹0.40 total annually to ₹5.20. This works out to be a compound annual growth rate (CAGR) of approximately 38% a year over that time. Advanced Enzyme Technologies has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Advanced Enzyme Technologies May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, Advanced Enzyme Technologies' EPS was effectively flat over the past five years, which could stop the company from paying more every year. Growth of 0.2% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On Advanced Enzyme Technologies' Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Advanced Enzyme Technologies that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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