MSTC's (NSE:MSTCLTD) Dividend Will Be ₹4.40

MSTC Limited (NSE:MSTCLTD) will pay a dividend of ₹4.40 on the 27th of October. Based on this payment, the dividend yield on the company's stock will be 4.4%, which is an attractive boost to shareholder returns.

View our latest analysis for MSTC

MSTC's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite comfortably covered by MSTC's earnings, but it was a bit tighter on the cash flow front. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.

Looking forward, earnings per share could rise by 9.6% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 44% by next year, which we think can be pretty sustainable going forward.

MSTC's Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2020, the annual payment back then was ₹3.30, compared to the most recent full-year payment of ₹12.90. This implies that the company grew its distributions at a yearly rate of about 98% over that duration. 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.

MSTC Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. MSTC has seen EPS rising for the last five years, at 9.6% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Our Thoughts On MSTC's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about MSTC's payments, as there could be some issues with sustaining them into the future. While MSTC is earning enough to cover the dividend, we are generally unimpressed with its future prospects. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for MSTC that investors need to be conscious of moving forward. Is MSTC not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.