Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Vidhi Specialty Food Ingredients Limited (NSE:VIDHIING) is about to trade ex-dividend in the next 3 days. Investors can purchase shares before the 26th of August in order to be eligible for this dividend, which will be paid on the 13th of September.
Vidhi Specialty Food Ingredients's upcoming dividend is ₹0.20 a share, following on from the last 12 months, when the company distributed a total of ₹0.80 per share to shareholders. Based on the last year's worth of payments, Vidhi Specialty Food Ingredients stock has a trailing yield of around 1.5% on the current share price of ₹54.75. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Vidhi Specialty Food Ingredients can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Vidhi Specialty Food Ingredients paid out just 14% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Vidhi Specialty Food Ingredients's earnings have been skyrocketing, up 37% per annum for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Vidhi Specialty Food Ingredients looks like a promising growth company.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 7 years ago, Vidhi Specialty Food Ingredients has lifted its dividend by approximately 22% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
The Bottom Line
From a dividend perspective, should investors buy or avoid Vidhi Specialty Food Ingredients? Vidhi Specialty Food Ingredients has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.
Want to learn more about Vidhi Specialty Food Ingredients? Here's a visualisation of its historical rate of revenue and earnings growth.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.