Minda Corporation Limited (NSE:MINDACORP) Passed Our Checks, And It's About To Pay A ₹0.50 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Minda Corporation Limited (NSE:MINDACORP) is about to trade ex-dividend in the next two days. The ex-dividend date is usually set to be one business day 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 an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Minda's shares before the 12th of February in order to receive the dividend, which the company will pay on the 5th of March.

The company's next dividend payment will be ₹0.50 per share, on the back of last year when the company paid a total of ₹1.40 to shareholders. Last year's total dividend payments show that Minda has a trailing yield of 0.2% on the current share price of ₹576.95. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Minda has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Minda

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. Minda has a low and conservative payout ratio of just 12% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 23% 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.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Minda, with earnings per share up 8.6% on average over the last five years. Earnings per share have been growing at a decent rate, and the company is retaining more than three-quarters of its earnings in the business. If profits are reinvested effectively, this could be a bullish combination for future earnings and dividends.

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, Minda has lifted its dividend by approximately 21% a year on average. 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 Minda worth buying for its dividend? Earnings per share growth has been growing somewhat, and Minda is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Minda is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Minda, and we would prioritise taking a closer look at it.

In light of that, while Minda has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 1 warning sign for Minda that we recommend you consider before investing in the business.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.