Is It Smart To Buy Maan Aluminium Limited (NSE:MAANALU) Before It Goes Ex-Dividend?

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Maan Aluminium Limited (NSE:MAANALU) is about to trade ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 19th of November will not receive this dividend, which will be paid on the 10th of December.

Maan Aluminium's next dividend payment will be ₹1.00 per share, and in the last 12 months, the company paid a total of ₹1.00 per share. Based on the last year's worth of payments, Maan Aluminium stock has a trailing yield of around 1.4% on the current share price of ₹72.35. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Maan Aluminium

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. A useful secondary check can be to evaluate whether Maan Aluminium generated enough free cash flow to afford its dividend. It paid out 3.6% of its free cash flow as dividends last year, which is conservatively low.

Click here to see how much of its profit Maan Aluminium paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Maan Aluminium has grown its earnings rapidly, up 91% a year for the past five years. Maan Aluminium is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Maan Aluminium has delivered an average of 7.2% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is Maan Aluminium an attractive dividend stock, or better left on the shelf? It's great that Maan Aluminium 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 Maan Aluminium, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks Maan Aluminium is facing. To help with this, we've discovered 3 warning signs for Maan Aluminium (1 shouldn't be ignored!) that you ought to be aware of before buying the shares.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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