Vidhi Specialty Food Ingredients' (NSE:VIDHIING) Dividend Will Be ₹1.00

Vidhi Specialty Food Ingredients Limited (NSE:VIDHIING) has announced that it will pay a dividend of ₹1.00 per share on the 11th of December. Even though the dividend went up, the yield is still quite low at only 0.5%.

View our latest analysis for Vidhi Specialty Food Ingredients

Vidhi Specialty Food Ingredients' Payment Could Potentially Have Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. However, Vidhi Specialty Food Ingredients' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

If the trend of the last few years continues, EPS will grow by 4.6% over the next 12 months. If the dividend continues on this path, the payout ratio could be 49% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was ₹0.20 in 2014, and the most recent fiscal year payment was ₹2.60. This works out to be a compound annual growth rate (CAGR) of approximately 29% a year over that time. Vidhi Specialty Food Ingredients 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.

Vidhi Specialty Food Ingredients May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, Vidhi Specialty Food Ingredients has only grown its earnings per share at 4.6% per annum over the past five years. While EPS growth is quite low, Vidhi Specialty Food Ingredients has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Vidhi Specialty Food Ingredients' Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Vidhi Specialty Food Ingredients that you should be aware of before investing. Is Vidhi Specialty Food Ingredients not quite the opportunity you were looking for? Why not check out our selection of top 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.