Income investors should be aware that VST Industries Limited (NSE: VSTIND) will soon be ex-dividend


Readers hoping to buy VST Industries Limited (NSE:VSTIND) for its dividend will have to come soon, as the stock is set to trade ex-dividend. The ex-dividend date is one business day before a company’s record date, which is the date the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because the settlement process involves two full business days. So if you miss this date, you will not be on the company’s books as of the record date. This means that investors who buy shares of VST Industries on or after July 13 will not receive the dividend, which will be paid on August 28.

The company’s next dividend is ₹140 per share, following the last 12 months, when the company distributed a total of ₹140 per share to shareholders. Based on the value of last year’s payouts, VST Industries stock has a yield of around 4.3% on the current share price of ₹3265.75. We love to see companies pay out a dividend, but it’s also important to make sure that laying the golden eggs doesn’t kill our golden hen! We therefore need to check whether dividend payments are covered and whether profits are increasing.

See our latest analysis for VST Industries

Dividends are usually paid out of company earnings, so if a company pays out more than it has earned, its dividend is usually at risk of being reduced. VST Industries pays out an acceptable 68% of its profits, a common payout level for most companies. A useful secondary check may be to assess whether VST Industries has generated enough free cash flow to pay its dividend. Over the past year, it has paid out more than three-quarters (77%) of its free cash flow generated, which is quite high and may start to limit reinvestments in the business.

It is positive to see that the VST Industries dividend is covered by both earnings and cash flow, as this is usually a sign that the dividend is sustainable, and a lower payout ratio usually suggests a higher margin security before the dividend is cut.

Click here to see how much of its profit VST Industries has paid out over the past 12 months.

NSEI:VSTIND Historic Dividend July 9, 2022

Have earnings and dividends increased?

Stocks of companies that generate sustainable earnings growth often offer the best dividend prospects because it is easier to increase the dividend when earnings increase. If earnings fall enough, the company could be forced to cut its dividend. Luckily for readers, VST Industries’ earnings per share have grown 16% annually over the past five years. The company has paid out most of its profits in the form of dividends over the past year, even though business is booming and earnings per share are rising rapidly. We are surprised that management did not choose to reinvest more in the business to further accelerate growth.

Many investors will gauge a company’s dividend yield by evaluating how much dividend payouts have changed over time. VST Industries has achieved dividend growth of 12% per year on average over the past 10 years. It’s exciting to see that earnings and dividends per share have grown rapidly over the past few years.

The essential

Does VST Industries have what it takes to maintain its dividend payouts? Higher earnings per share generally result in higher dividends from long-term dividend-paying stocks. That’s why we’re happy to see VST Industries’ earnings per share increase, even though, as we’ve seen, the company pays out more than half of its earnings and cash flow – 68% and 77% respectively. In summary, although it has positive characteristics, we are not inclined to rush to buy VST Industries today.

Although it is tempting to invest in VST Industries just for the dividends, you should always be aware of the risks involved. To do this, you need to find out about the 2 warning signs we spotted with VST Industries (including 1 which is of concern).

As a general rule, we don’t recommend simply buying the first dividend-paying stock you see. Here is a curated list of attractive stocks that are strong dividend payers.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.


Comments are closed.