Aries Agro (NSE:ARIES) Will Pay A Dividend Of ₹1.00

The board of Aries Agro Limited (NSE:ARIES) has announced that it will pay a dividend on the 15th of October, with investors receiving ₹1.00 per share. The dividend yield is 0.4% based on this payment, which is a little bit low compared to the other companies in the industry.

View our latest analysis for Aries Agro

Aries Agro's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. 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 15.5% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 4.4% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from ₹1.50 total annually to ₹1.00. This works out to be a decline of approximately 4.0% 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.

The Dividend Looks Likely To Grow

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. We are encouraged to see that Aries Agro has grown earnings per share at 15% per year over the past five years. Aries Agro definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Aries Agro Looks Like A Great Dividend Stock

In summary, it is good to see that the dividend is staying consistent, and we don't think there is any reason to suspect this might change over the medium term. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 3 warning signs for Aries Agro that investors should know about before committing capital to this stock. 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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