Motherson Sumi Wiring India (NSE:MSUMI) Is Paying Out A Larger Dividend Than Last Year

Motherson Sumi Wiring India Limited (NSE:MSUMI) has announced that it will be increasing its dividend from last year's comparable payment on the 29th of September to ₹0.80. This will take the dividend yield to an attractive 1.1%, providing a nice boost to shareholder returns.

See our latest analysis for Motherson Sumi Wiring India

Motherson Sumi Wiring India's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Motherson Sumi Wiring India's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

The next year is set to see EPS grow by 59.8%. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.

Motherson Sumi Wiring India Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 2 years, which isn't that long in the grand scheme of things. Since 2022, the annual payment back then was ₹0.607, compared to the most recent full-year payment of ₹0.80. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Earnings has been rising at 4.7% per annum over the last five years, which admittedly is a bit slow. Motherson Sumi Wiring India is struggling to find viable investments, so it is returning more to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 1 warning sign for Motherson Sumi Wiring India that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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