MAS Financial Services (NSE:MASFIN) Is Paying Out A Larger Dividend Than Last Year

MAS Financial Services Limited's (NSE:MASFIN) dividend will be increasing from last year's payment of the same period to ₹1.80 on 3rd of March. This takes the annual payment to 0.5% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for MAS Financial Services

MAS Financial Services' Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, MAS Financial Services' earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share could rise by 12.1% 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 8.8% by next year, which we think can be pretty sustainable going forward.

MAS Financial Services' Dividend Has Lacked Consistency

Looking back, MAS Financial Services' dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. Since 2018, the annual payment back then was ₹3.00, compared to the most recent full-year payment of ₹3.60. This implies that the company grew its distributions at a yearly rate of about 3.7% over that duration. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. MAS Financial Services has seen EPS rising for the last five years, at 12% per annum. MAS Financial Services definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

Overall, we always like to see the dividend being raised, but we don't think MAS Financial Services will make a great income stock. While MAS Financial Services is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, MAS Financial Services has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about. 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.