Is Vedanta Resources plc (LON:VED) A Smart Choice For Dividend Investors?

There is a lot to be liked about Vedanta Resources plc (LON:VED) as an income stock, over the past 10 years it has returned an average of 4.00% per year. The stock currently pays out a dividend yield of 6.99%, and has a market cap of UK£1.94b. Should it have a place in your portfolio? Let’s take a look at Vedanta Resources in more detail. Check out our latest analysis for Vedanta Resources

How I analyze a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

• Does it pay an annual yield higher than 75% of dividend payers?

• Has it paid dividend every year without dramatically reducing payout in the past?

• Has it increased its dividend per share amount over the past?

• Can it afford to pay the current rate of dividends from its earnings?

• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

LSE:VED Historical Dividend Yield June 22nd 18

Does Vedanta Resources pass our checks?

Vedanta Resources has a trailing twelve-month payout ratio of 76.62%, meaning the dividend is sufficiently covered by earnings. However, going forward, analysts expect VED’s payout to fall to 37.43% of its earnings, which leads to a dividend yield of around 7.39%. However, EPS should increase to $1.35, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.

If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Although VED’s per share payments have increased in the past 10 years, it has not been a completely smooth ride. Investors have seen reductions in the dividend per share in the past, although, it has picked up again.

Relative to peers, Vedanta Resources produces a yield of 6.99%, which is high for Metals and Mining stocks.

Next Steps:

With these dividend metrics in mind, I definitely rank Vedanta Resources as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three essential factors you should look at:

1. Future Outlook: What are well-informed industry analysts predicting for VED’s future growth? Take a look at our free research report of analyst consensus for VED’s outlook.

2. Valuation: What is VED worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether VED is currently mispriced by the market.

3. Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.