Multi Commodity Exchange of India (NSE:MCX) Has Announced That It Will Be Increasing Its Dividend To ₹19.09

The board of Multi Commodity Exchange of India Limited (NSE:MCX) has announced that it will be paying its dividend of ₹19.09 on the 24th of October, an increased payment from last year's comparable dividend. Even though the dividend went up, the yield is still quite low at only 1.2%.

View our latest analysis for Multi Commodity Exchange of India

Multi Commodity Exchange of India's Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Based on the last dividend, Multi Commodity Exchange of India is earning enough to cover the payment, but then it makes up 139% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Looking forward, earnings per share is forecast to rise by 166.5% over the next year. If the dividend continues on this path, the payout ratio could be 30% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of ₹24.00 in 2013 to the most recent total annual payment of ₹19.09. This works out to be a decline of approximately 2.3% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

We Could See Multi Commodity Exchange of India's Dividend Growing

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. Multi Commodity Exchange of India has impressed us by growing EPS at 7.3% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Multi Commodity Exchange of India that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.