Mazagon Dock Shipbuilders (NSE:MAZDOCK) Is Paying Out A Larger Dividend Than Last Year

The board of Mazagon Dock Shipbuilders Limited (NSE:MAZDOCK) has announced that it will be increasing its dividend by 69% on the 8th of December to ₹15.34, up from last year's comparable payment of ₹9.10. Despite this raise, the dividend yield of 0.8% is only a modest boost to shareholder returns.

See our latest analysis for Mazagon Dock Shipbuilders

Mazagon Dock Shipbuilders' Earnings Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. However, prior to this announcement, Mazagon Dock Shipbuilders' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 9.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

Mazagon Dock Shipbuilders' Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2020, the annual payment back then was ₹10.82, compared to the most recent full-year payment of ₹15.96. This means that it has been growing its distributions at 14% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Mazagon Dock Shipbuilders has seen EPS rising for the last five years, at 24% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Mazagon Dock Shipbuilders Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. 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. 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 Mazagon Dock Shipbuilders that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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