Man Infraconstruction (NSE:MANINFRA) Is Reducing Its Dividend To ₹0.36

Man Infraconstruction Limited (NSE:MANINFRA) has announced that on 4th of December, it will be paying a dividend of₹0.36, which a reduction from last year's comparable dividend. Despite the cut, the dividend yield of 0.8% will still be comparable to other companies in the industry.

View our latest analysis for Man Infraconstruction

Man Infraconstruction's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. However, prior to this announcement, Man Infraconstruction's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 39.2% if recent trends continue. If the dividend continues on this path, the payout ratio could be 10.0% by next year, which we think can be pretty sustainable going forward.

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 dividend has gone from an annual total of ₹0.30 in 2013 to the most recent total annual payment of ₹1.08. This works out to be a compound annual growth rate (CAGR) of approximately 14% 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. Man Infraconstruction has seen EPS rising for the last five years, at 39% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like Man Infraconstruction's Dividend

It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that Man Infraconstruction has the makings of a solid income stock moving forward. Reducing the amount it is paying as a dividend can protect the company's balance sheet, keeping the dividend sustainable for longer. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Man Infraconstruction 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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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.