MRF Limited (NSE:MRF) will increase its dividend from last year's comparable payment on the 31st of August to ₹194.00. This takes the annual payment to 0.2% of the current stock price, which unfortunately is below what the industry is paying.
View our latest analysis for MRF
MRF's Payment Has Solid Earnings Coverage
Even a low dividend yield can be attractive if it is sustained for years on end. However, MRF's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Looking forward, earnings per share is forecast to rise by 12.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 4.1%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the dividend has gone from ₹25.00 total annually to ₹200.00. This implies that the company grew its distributions at a yearly rate of about 23% over that duration. MRF has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that MRF has grown earnings per share at 13% per year over the past five years. MRF definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
We Really Like MRF's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 5 analysts we track are forecasting for MRF for free with public analyst estimates for the company. Is MRF not quite the opportunity you were looking for? Why not check out 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.
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About NSEI:MRF
MRF
Engages in the manufacture, sale, and trading of rubber products in India and internationally.
Flawless balance sheet with proven track record.
