Vinati Organics (NSE:VINATIORGA) Will Pay A Larger Dividend Than Last Year At ₹7.00

The board of Vinati Organics Limited (NSE:VINATIORGA) has announced that it will be paying its dividend of ₹7.00 on the 8th of October, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 0.4%.

See our latest analysis for Vinati Organics

Vinati Organics' Payment Has Solid Earnings Coverage

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

The next year is set to see EPS grow by 23.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 16%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ₹1.25 in 2013 to the most recent total annual payment of ₹7.00. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. 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. It's encouraging to see that Vinati Organics has been growing its earnings per share at 20% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Vinati Organics' Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. 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.

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