Vidhi Specialty Food Ingredients (NSE:VIDHIING) Has Announced A Dividend Of ₹0.20

Vidhi Specialty Food Ingredients Limited (NSE:VIDHIING) has announced that it will pay a dividend of ₹0.20 per share on the 28th of October. This payment means the dividend yield will be 0.2%, which is below the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Vidhi Specialty Food Ingredients' stock price has increased by 84% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Vidhi Specialty Food Ingredients

Vidhi Specialty Food Ingredients' Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Vidhi Specialty Food Ingredients' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS could expand by 24.3% if recent trends continue. If the dividend continues on this path, the payout ratio could be 5.9% by next year, which we think can be pretty sustainable going forward.

Vidhi Specialty Food Ingredients' Dividend Has Lacked Consistency

It's comforting to see that Vidhi Specialty Food Ingredients has been paying a dividend for a number of years now, however it has been cut at least once in that time. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The first annual payment during the last 9 years was ₹0.20 in 2012, and the most recent fiscal year payment was ₹0.80. This implies that the company grew its distributions at a yearly rate of about 17% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Vidhi Specialty Food Ingredients has grown earnings per share at 24% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Vidhi Specialty Food Ingredients' Dividend

Overall, we like to see the dividend staying consistent, and we think Vidhi Specialty Food Ingredients might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Vidhi Specialty Food Ingredients that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

When trading Vidhi Specialty Food Ingredients or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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