Be Sure To Check Out Vidhi Specialty Food Ingredients Limited (NSE:VIDHIING) Before It Goes Ex-Dividend

It looks like Vidhi Specialty Food Ingredients Limited (NSE:VIDHIING) is about to go ex-dividend in the next three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Meaning, you will need to purchase Vidhi Specialty Food Ingredients' shares before the 21st of August to receive the dividend, which will be paid on the 7th of September.

The company's next dividend payment will be ₹1.00 per share. Last year, in total, the company distributed ₹2.00 to shareholders. Last year's total dividend payments show that Vidhi Specialty Food Ingredients has a trailing yield of 0.5% on the current share price of ₹439.30. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Vidhi Specialty Food Ingredients

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Vidhi Specialty Food Ingredients paying out a modest 27% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 16% of its cash flow last year.

It's positive to see that Vidhi Specialty Food Ingredients's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit Vidhi Specialty Food Ingredients paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Vidhi Specialty Food Ingredients, with earnings per share up 4.7% on average over the last five years. Recent growth has not been impressive. However, companies that see their growth slow can often choose to pay out a greater percentage of earnings to shareholders, which could see the dividend continue to rise.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Vidhi Specialty Food Ingredients has lifted its dividend by approximately 26% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

From a dividend perspective, should investors buy or avoid Vidhi Specialty Food Ingredients? Earnings per share growth has been growing somewhat, and Vidhi Specialty Food Ingredients is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Vidhi Specialty Food Ingredients is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Vidhi Specialty Food Ingredients, and we would prioritise taking a closer look at it.

While it's tempting to invest in Vidhi Specialty Food Ingredients for the dividends alone, you should always be mindful of the risks involved. For example, we've found 1 warning sign for Vidhi Specialty Food Ingredients that we recommend you consider before investing in the business.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.