Stock Analysis

Vinati Organics (NSE:VINATIORGA) Has Announced A Dividend Of ₹7.00

Published
NSEI:VINATIORGA

The board of Vinati Organics Limited (NSE:VINATIORGA) has announced that it will pay a dividend of ₹7.00 per share on the 10th of October. This means the annual payment will be 0.3% of the current stock price, which is lower than the industry average.

See our latest analysis for Vinati Organics

Vinati Organics' Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, Vinati Organics was earning enough to cover the dividend, but free cash flows weren't positive. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Looking forward, earnings per share is forecast to rise by 23.3% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 21%, which is in the range that makes us comfortable with the sustainability of the dividend.

NSEI:VINATIORGA Historic Dividend August 17th 2024

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was ₹1.50, compared to the most recent full-year payment of ₹7.00. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Vinati Organics May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings has been rising at 2.2% per annum over the last five years, which admittedly is a bit slow. While growth may be thin on the ground, Vinati Organics could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Vinati Organics' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Vinati Organics' payments, as there could be some issues with sustaining them into the future. While Vinati Organics is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 Vinati Organics that investors should know about before committing capital to this stock. Is Vinati Organics not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

New: Manage All Your Stock Portfolios in One Place

We've created the ultimate portfolio companion for stock investors, and it's free.

• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your stocks

Try a Demo Portfolio for Free

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.