Best Agrolife's (NSE:BESTAGRO) Dividend Will Be ₹3.00

Best Agrolife Limited (NSE:BESTAGRO) will pay a dividend of ₹3.00 on the 30th of October. This means the annual payment will be 0.4% of the current stock price, which is lower than the industry average.

See our latest analysis for Best Agrolife

Best Agrolife's Projected Earnings Seem Likely To Cover Future Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Best Agrolife is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS could expand by 28.6% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 21%, which is in the range that makes us comfortable with the sustainability of the dividend.

Best Agrolife Is Still Building Its Track Record

It is great to see that Best Agrolife has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of ₹0.10 in 2016 to the most recent total annual payment of ₹3.00. This implies that the company grew its distributions at a yearly rate of about 53% over that duration. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

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. We are encouraged to see that Best Agrolife has grown earnings per share at 29% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Our Thoughts On Best Agrolife's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Best Agrolife's payments, as there could be some issues with sustaining them into the future. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Best Agrolife is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Best Agrolife has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about. 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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