There's A Lot To Like About Maharashtra Seamless' (NSE:MAHSEAMLES) Upcoming ₹10.00 Dividend
Maharashtra Seamless Limited (NSE:MAHSEAMLES) stock is about to trade ex-dividend in three days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Maharashtra Seamless' shares before the 1st of September to receive the dividend, which will be paid on the 15th of October.
The company's next dividend payment will be ₹10.00 per share. Last year, in total, the company distributed ₹10.00 to shareholders. Based on the last year's worth of payments, Maharashtra Seamless has a trailing yield of 1.6% on the current stock price of ₹642.05. If you buy this business for its dividend, you should have an idea of whether Maharashtra Seamless's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Maharashtra Seamless has a low and conservative payout ratio of just 19% of its income after tax. A useful secondary check can be to evaluate whether Maharashtra Seamless generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 18% of its cash flow last year.
It's positive to see that Maharashtra Seamless'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 Maharashtra Seamless
Click here to see how much of its profit Maharashtra Seamless paid out over the last 12 months.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Maharashtra Seamless has grown its earnings rapidly, up 50% a year for the past five years. Maharashtra Seamless looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Maharashtra Seamless has lifted its dividend by approximately 15% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Final Takeaway
Should investors buy Maharashtra Seamless for the upcoming dividend? It's great that Maharashtra Seamless is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Maharashtra Seamless, and we would prioritise taking a closer look at it.
So while Maharashtra Seamless looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 1 warning sign for Maharashtra Seamless you should be aware of.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.