Why You Might Be Interested In Multi Commodity Exchange of India Limited (NSE:MCX) For Its Upcoming Dividend

Readers hoping to buy Multi Commodity Exchange of India Limited (NSE:MCX) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. In other words, investors can purchase Multi Commodity Exchange of India's shares before the 19th of September in order to be eligible for the dividend, which will be paid on the 24th of October.

The company's upcoming dividend is ₹7.64 a share, following on from the last 12 months, when the company distributed a total of ₹7.64 per share to shareholders. Based on the last year's worth of payments, Multi Commodity Exchange of India stock has a trailing yield of around 0.1% on the current share price of ₹5308.80. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Multi Commodity Exchange of India

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Multi Commodity Exchange of India's payout ratio is modest, at just 47% of profit.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at Multi Commodity Exchange of India, with earnings per share up 3.5% on average over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Multi Commodity Exchange of India's dividend payments per share have declined at 8.7% per year on average over the past 10 years, which is uninspiring. Multi Commodity Exchange of India is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

The Bottom Line

From a dividend perspective, should investors buy or avoid Multi Commodity Exchange of India? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. We think this is a pretty attractive combination, and would be interested in investigating Multi Commodity Exchange of India more closely.

Wondering what the future holds for Multi Commodity Exchange of India? See what the nine analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.