Here's What We Like About Vidhi Specialty Food Ingredients' (NSE:VIDHIING) Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Vidhi Specialty Food Ingredients Limited (NSE:VIDHIING) is about to trade ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Therefore, if you purchase Vidhi Specialty Food Ingredients' shares on or after the 16th of February, you won't be eligible to receive the dividend, when it is paid on the 8th of March.

The company's next dividend payment will be ₹0.60 per share, on the back of last year when the company paid a total of ₹1.20 to shareholders. Based on the last year's worth of payments, Vidhi Specialty Food Ingredients has a trailing yield of 0.3% on the current stock price of ₹421.25. If you buy this business for its dividend, you should have an idea of whether Vidhi Specialty Food Ingredients's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for Vidhi Specialty Food Ingredients

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Vidhi Specialty Food Ingredients paid out just 20% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. Luckily it paid out just 9.2% of its free cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. For this reason, we're glad to see Vidhi Specialty Food Ingredients's earnings per share have risen 17% per annum over the last five years. Earnings per share are growing rapidly and the company is keeping more than half of its earnings within the business; an attractive combination which could suggest the company is focused on reinvesting to grow earnings further. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Vidhi Specialty Food Ingredients has increased its dividend at approximately 20% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

The Bottom Line

Is Vidhi Specialty Food Ingredients an attractive dividend stock, or better left on the shelf? It's great that Vidhi Specialty Food Ingredients is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Vidhi Specialty Food Ingredients looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Vidhi Specialty Food Ingredients has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 1 warning sign for Vidhi Specialty Food Ingredients that you should be aware of before investing in their shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.