Manappuram Finance (NSE:MANAPPURAM) Will Pay A Larger Dividend Than Last Year At ₹1.00

Manappuram Finance Limited (NSE:MANAPPURAM) will increase its dividend from last year's comparable payment on the 22nd of June to ₹1.00. This makes the dividend yield 2.3%, which is above the industry average.

Check out our latest analysis for Manappuram Finance

Manappuram Finance's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, Manappuram Finance was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 52.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 9.9% by next year, which is in a pretty sustainable range.

Manappuram Finance Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was ₹1.50 in 2014, and the most recent fiscal year payment was ₹4.00. This means that it has been growing its distributions at 10% 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.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Manappuram Finance has grown earnings per share at 18% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Manappuram Finance's prospects of growing its dividend payments in the future.

Our Thoughts On Manappuram Finance's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Manappuram Finance's payments are rock solid. While Manappuram Finance is earning enough to cover the payments, the cash flows are lacking. We don't think Manappuram Finance is a great stock to add to your portfolio if income is your focus.

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. Just as an example, we've come across 2 warning signs for Manappuram Finance you should be aware of, and 1 of them is concerning. If you are a dividend investor, you might also want to look at our curated list of high yield 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.