Veedol (NSE:VEEDOL) Is Increasing Its Dividend To ₹22.00

Veedol Corporation Limited (NSE:VEEDOL) has announced that it will be increasing its dividend from last year's comparable payment on the 26th of September to ₹22.00. This takes the dividend yield to 3.2%, which shareholders will be pleased with.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Veedol's Projected Earnings Seem Likely To Cover Future Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Based on the last payment, Veedol's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

If the trend of the last few years continues, EPS will grow by 6.9% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 55%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Veedol

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ₹10.00 in 2015, and the most recent fiscal year payment was ₹54.00. This means that it has been growing its distributions at 18% per annum over that time. Veedol has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Has Growth Potential

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Veedol has grown earnings per share at 6.9% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Veedol will make a great income stock. While Veedol is earning enough to cover the payments, the cash flows are lacking. We don't think Veedol 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Veedol (1 makes us a bit uncomfortable!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.