Vidhi Specialty Food Ingredients (NSE:VIDHIING) Is Due To Pay A Dividend Of ₹1.00

Vidhi Specialty Food Ingredients Limited's (NSE:VIDHIING) investors are due to receive a payment of ₹1.00 per share on 24th of October. Despite this raise, the dividend yield of 0.6% is only a modest boost to shareholder returns.

See our latest analysis for Vidhi Specialty Food Ingredients

Vidhi Specialty Food Ingredients' Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, Vidhi Specialty Food Ingredients' dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 4.7% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 42% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was ₹0.20 in 2014, and the most recent fiscal year payment was ₹2.60. This implies that the company grew its distributions at a yearly rate of about 29% over that duration. 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

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings have grown at around 4.7% a year for the past five years, which isn't massive but still better than seeing them shrink. 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

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Vidhi Specialty Food Ingredients that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of 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.