Mishra Dhatu Nigam Limited (NSE:MIDHANI) Will Pay A ₹1.25 Dividend In Three Days
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Mishra Dhatu Nigam Limited (NSE:MIDHANI) is about to trade ex-dividend in the next three days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. This means that investors who purchase Mishra Dhatu Nigam's shares on or after the 23rd of September will not receive the dividend, which will be paid on the 30th of October.
The company's next dividend payment will be ₹1.25 per share, on the back of last year when the company paid a total of ₹2.50 to shareholders. Looking at the last 12 months of distributions, Mishra Dhatu Nigam has a trailing yield of approximately 0.6% on its current stock price of ₹417.30. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
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. Mishra Dhatu Nigam paid out a comfortable 30% of its profit last year. A useful secondary check can be to evaluate whether Mishra Dhatu Nigam 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 15% of its cash flow last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Check out our latest analysis for Mishra Dhatu Nigam
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. So we're not too excited that Mishra Dhatu Nigam's earnings are down 4.1% a year over the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last eight years, Mishra Dhatu Nigam has lifted its dividend by approximately 2.2% a year on average.
To Sum It Up
From a dividend perspective, should investors buy or avoid Mishra Dhatu Nigam? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. To summarise, Mishra Dhatu Nigam looks okay on this analysis, although it doesn't appear a stand-out opportunity.
On that note, you'll want to research what risks Mishra Dhatu Nigam is facing. Our analysis shows 1 warning sign for Mishra Dhatu Nigam and you should be aware of this before buying any shares.
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.