V.S.T. Tillers Tractors Limited (NSE:VSTTILLERS) Passed Our Checks, And It's About To Pay A ₹25.00 Dividend
It looks like V.S.T. Tillers Tractors Limited (NSE:VSTTILLERS) is about to go ex-dividend in the next two days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. This means that investors who purchase V.S.T. Tillers Tractors' shares on or after the 16th of September will not receive the dividend, which will be paid on the 23rd of October.
The company's next dividend payment will be ₹25.00 per share, and in the last 12 months, the company paid a total of ₹25.00 per share. Last year's total dividend payments show that V.S.T. Tillers Tractors has a trailing yield of 0.6% on the current share price of ₹4042.90. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether V.S.T. Tillers Tractors can afford its dividend, and if the dividend could grow.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. V.S.T. Tillers Tractors has a low and conservative payout ratio of just 21% of its income after tax. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It paid out 16% of its free cash flow as dividends last year, which is conservatively low.
It's positive to see that V.S.T. Tillers Tractors's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Check out our latest analysis for V.S.T. Tillers Tractors
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see V.S.T. Tillers Tractors earnings per share are up 3.7% per annum over the last five years. Growth has been anaemic. Yet with more than 75% of its earnings being kept in the business, there is ample room to reinvest in growth or lift the payout ratio - either of which could increase the dividend.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, V.S.T. Tillers Tractors has lifted its dividend by approximately 5.2% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Is V.S.T. Tillers Tractors an attractive dividend stock, or better left on the shelf? Earnings per share have been growing moderately, and V.S.T. Tillers Tractors is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and V.S.T. Tillers Tractors is halfway there. Overall we think this is an attractive combination and worthy of further research.
In light of that, while V.S.T. Tillers Tractors has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 1 warning sign for V.S.T. Tillers Tractors that we recommend you consider before investing in the business.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.