Mazagon Dock Shipbuilders Limited (NSE:MAZDOCK) Passed Our Checks, And It's About To Pay A ₹2.71 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Mazagon Dock Shipbuilders Limited (NSE:MAZDOCK) is about to trade ex-dividend in the next 3 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Mazagon Dock Shipbuilders' shares before the 19th of September in order to receive the dividend, which the company will pay on the 26th of October.

The company's next dividend payment will be ₹2.71 per share, on the back of last year when the company paid a total of ₹17.30 to shareholders. Based on the last year's worth of payments, Mazagon Dock Shipbuilders stock has a trailing yield of around 0.6% on the current share price of ₹2924.70. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

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Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Mazagon Dock Shipbuilders's payout ratio is modest, at just 29% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Dividends consumed 56% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's positive to see that Mazagon Dock Shipbuilders's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

See our latest analysis for Mazagon Dock Shipbuilders

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Mazagon Dock Shipbuilders has grown its earnings rapidly, up 39% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Mazagon Dock Shipbuilders has delivered 26% dividend growth per year on average over the past five years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

To Sum It Up

Should investors buy Mazagon Dock Shipbuilders for the upcoming dividend? Earnings per share have grown at a nice rate in recent times and over the last year, Mazagon Dock Shipbuilders paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about Mazagon Dock Shipbuilders, and we would prioritise taking a closer look at it.

On that note, you'll want to research what risks Mazagon Dock Shipbuilders is facing. To help with this, we've discovered 1 warning sign for Mazagon Dock Shipbuilders that you should be aware of before investing in their shares.

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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.