Mangal Credit and Fincorp (NSE:MANCREDIT) Is Increasing Its Dividend To ₹0.75

Mangal Credit and Fincorp Limited (NSE:MANCREDIT) will increase its dividend from last year's comparable payment on the 25th of October to ₹0.75. Despite this raise, the dividend yield of 0.4% is only a modest boost to shareholder returns.

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Mangal Credit and Fincorp's Payment Could Potentially Have Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, Mangal Credit and Fincorp's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

EPS is set to fall by 1.0% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could be 14%, which we are pretty comfortable with and we think is feasible on an earnings basis.

See our latest analysis for Mangal Credit and Fincorp

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was ₹0.0833 in 2015, and the most recent fiscal year payment was ₹0.75. This implies that the company grew its distributions at a yearly rate of about 25% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Mangal Credit and Fincorp hasn't seen much change in its earnings per share over the last five years.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Mangal Credit and Fincorp will make a great income stock. While Mangal Credit and Fincorp is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Mangal Credit and Fincorp (1 is a bit unpleasant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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