Aries Agro (NSE:ARIES) Is Increasing Its Dividend To ₹1.00

Aries Agro Limited's (NSE:ARIES) dividend will be increasing from last year's payment of the same period to ₹1.00 on 20th of October. Despite this raise, the dividend yield of 0.5% is only a modest boost to shareholder returns.

Check out our latest analysis for Aries Agro

Aries Agro's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Aries Agro's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 4.8% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 7.3%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2013, the dividend has gone from ₹1.50 total annually to ₹1.00. Doing the maths, this is a decline of about 4.0% per year. 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.

The Dividend's Growth Prospects Are Limited

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings per share has been crawling upwards at 4.8% per year. While EPS growth is quite low, Aries Agro has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Aries Agro's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. As an example, we've identified 2 warning signs for Aries Agro that you should be aware of before investing. Is Aries Agro not quite the opportunity you were looking for? Why not check out our selection of top 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.