Vidhi Specialty Food Ingredients Limited (NSE:VIDHIING) Looks Interesting, And It's About To Pay A Dividend

It looks like Vidhi Specialty Food Ingredients Limited (NSE:VIDHIING) is about to go ex-dividend in the next 3 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. This means that investors who purchase Vidhi Specialty Food Ingredients' shares on or after the 17th of September will not receive the dividend, which will be paid on the 24th of October.

The company's upcoming dividend is ₹1.00 a share, following on from the last 12 months, when the company distributed a total of ₹2.00 per share to shareholders. Calculating the last year's worth of payments shows that Vidhi Specialty Food Ingredients has a trailing yield of 0.6% on the current share price of ₹452.95. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

See 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 flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Luckily it paid out just 16% of its free 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?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Vidhi Specialty Food Ingredients earnings per share are up 4.7% per annum over the last five years. Earnings per share growth in recent times has not been a standout. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Vidhi Specialty Food Ingredients has lifted its dividend by approximately 29% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Is Vidhi Specialty Food Ingredients worth buying for its dividend? Earnings per share have been growing moderately, and Vidhi Specialty Food Ingredients is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and Vidhi Specialty Food Ingredients is halfway there. Vidhi Specialty Food Ingredients looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

While it's tempting to invest in Vidhi Specialty Food Ingredients for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 1 warning sign for Vidhi Specialty Food Ingredients you should know about.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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.