Maharashtra Scooters (NSE:MAHSCOOTER) Is Due To Pay A Dividend Of ₹60.00

Maharashtra Scooters Ltd. (NSE:MAHSCOOTER) will pay a dividend of ₹60.00 on the 27th of July. The dividend yield will be 1.9% based on this payment which is still above the industry average.

Check out our latest analysis for Maharashtra Scooters

Maharashtra Scooters Doesn't Earn Enough To Cover Its Payments

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Before making this announcement, the company's dividend was higher than its profits, and made up 94% of cash flows. The company could be more focused on returning cash to shareholders, but this could indicate that growth opportunities are few and far between.

EPS is set to grow by 22.3% over the next year if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could reach 96%, which probably can't continue without starting to put some pressure on the balance sheet.

Maharashtra Scooters Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the dividend has gone from ₹20.00 total annually to ₹170.00. This means that it has been growing its distributions at 24% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth Could Be Constrained

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Maharashtra Scooters has grown earnings per share at 22% per year over the past five years. Although earnings per share is up nicely Maharashtra Scooters is paying out 97% of its earnings as dividends, which we feel is borderline unsustainable without extenuating circumstances.

Our Thoughts On Maharashtra Scooters' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. Although they have been consistent in the past, we think the payments are a little high to be sustained. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic 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 Maharashtra Scooters that investors should take into consideration. Is Maharashtra Scooters 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.

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