Vital Chemtech's (NSE:VITAL) Dividend Will Be ₹0.50

Vital Chemtech Limited's (NSE:VITAL) investors are due to receive a payment of ₹0.50 per share on 30th of October. This means the annual payment will be 0.6% of the current stock price, which is lower than the industry average.

See our latest analysis for Vital Chemtech

Vital Chemtech's Distributions May Be Difficult To Sustain

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Vital Chemtech's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

If the trend of the last few years continues, EPS will grow by 8.9% over the next 12 months. While it is good to see income moving in the right direction, it still looks like the company won't achieve profitability. Unless this happens fairly soon, the dividend could start to come under pressure.

Vital Chemtech Is Still Building Its Track Record

It is tough to make a judgement on how stable a dividend is when the company hasn't been paying one for very long. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

We Could See Vital Chemtech's Dividend Growing

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Vital Chemtech has impressed us by growing EPS at 8.9% per year over the past five years. Vital Chemtech definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Vital Chemtech's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Vital Chemtech's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 4 warning signs for Vital Chemtech (of which 1 is concerning!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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.