Menon Bearings (NSE:MENONBE) Has Announced A Dividend Of ₹2.00

Menon Bearings Limited (NSE:MENONBE) has announced that it will pay a dividend of ₹2.00 per share on the 24th of August. Based on this payment, the dividend yield on the company's stock will be 1.5%, which is an attractive boost to shareholder returns.

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Menon Bearings' Future Dividend Projections Seem Positive

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Menon Bearings was earning enough to cover the dividend, but free cash flows weren't positive. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

If the trend of the last few years continues, EPS will grow by 18.2% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.

Check out our latest analysis for Menon Bearings

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was ₹0.667, compared to the most recent full-year payment of ₹2.00. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. We are encouraged to see that Menon Bearings has grown earnings per share at 18% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Menon Bearings' payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Menon Bearings you should be aware of, and 1 of them makes us a bit uncomfortable. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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