Vimta Labs (NSE:VIMTALABS) Is Due To Pay A Dividend Of ₹2.00

Vimta Labs Limited's (NSE:VIMTALABS) investors are due to receive a payment of ₹2.00 per share on 25th of July. This payment means that the dividend yield will be 0.6%, which is around the industry average.

View our latest analysis for Vimta Labs

Vimta Labs' Dividend Is Well Covered By Earnings

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, prior to this announcement, Vimta Labs' dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS could expand by 31.3% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 8.8%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2012, the first annual payment was ₹0.40, compared to the most recent full-year payment of ₹2.00. This means that it has been growing its distributions at 17% per annum over that time. Vimta Labs 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.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see Vimta Labs has been growing its earnings per share at 31% 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.

Vimta Labs Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Vimta Labs might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Vimta Labs that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.