Monte Carlo Fashions (NSE:MONTECARLO) Is Increasing Its Dividend To ₹15.00

The board of Monte Carlo Fashions Limited (NSE:MONTECARLO) has announced that it will be increasing its dividend on the 24th of October to ₹15.00. This takes the dividend yield to 4.3%, which shareholders will be pleased with.

See our latest analysis for Monte Carlo Fashions

Monte Carlo Fashions' Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Monte Carlo Fashions was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 4.2% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 44% by next year, which is in a pretty sustainable range.

Monte Carlo Fashions' Dividend Has Lacked Consistency

Looking back, Monte Carlo Fashions' dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The dividend has gone from ₹10.00 in 2015 to the most recent annual payment of ₹15.00. This implies that the company grew its distributions at a yearly rate of about 7.0% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Monte Carlo Fashions might have put its house in order since then, but we remain cautious.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Earnings per share has been crawling upwards at 4.2% per year. Growth of 4.2% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 2 warning signs for Monte Carlo Fashions that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our curated list 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.
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