Mazda (NSE:MAZDA) Is Increasing Its Dividend To ₹11.00

Mazda Limited (NSE:MAZDA) will increase its dividend on the 17th of October to ₹11.00. This will take the annual payment from 1.8% to 1.8% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for Mazda

Mazda's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Mazda was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 9.3% over the next 12 months. If the dividend continues on this path, the payout ratio could be 23% 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. Since 2011, the dividend has gone from ₹3.50 to ₹11.00. This means that it has been growing its distributions at 12% per annum over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Mazda Could Grow Its Dividend

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. Mazda has seen EPS rising for the last five years, at 9.3% per annum. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Mazda Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for Mazda that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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