Bank of Maharashtra (NSE:MAHABANK) Is Increasing Its Dividend To ₹1.50

The board of Bank of Maharashtra (NSE:MAHABANK) has announced that the dividend on 1st of January will be increased to ₹1.50, which will be 7.1% higher than last year's payment of ₹1.40 which covered the same period. This will take the dividend yield to an attractive 2.8%, providing a nice boost to shareholder returns.

Our free stock report includes 1 warning sign investors should be aware of before investing in Bank of Maharashtra. Read for free now.

Bank of Maharashtra's Earnings Will Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable.

Having distributed dividends for at least 10 years, Bank of Maharashtra has a long history of paying out a part of its earnings to shareholders. While past data isn't a guarantee for the future, Bank of Maharashtra's latest earnings report puts its payout ratio at 20%, showing that the company can pay out its dividends comfortably.

Looking forward, earnings per share could rise by 59.9% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the future payout ratio will be 14%, which is in the range that makes us comfortable with the sustainability of the dividend.

Check out our latest analysis for Bank of Maharashtra

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ₹1.00 in 2015, and the most recent fiscal year payment was ₹1.40. This works out to be a compound annual growth rate (CAGR) of approximately 3.4% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Bank of Maharashtra has grown earnings per share at 60% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Bank of Maharashtra'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. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 1 warning sign for Bank of Maharashtra that investors should take into consideration. Is Bank of Maharashtra not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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