Readers hoping to buy Motilal Oswal Financial Services Limited (NSE:MOTILALOFS) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Ex-dividend means that investors that purchase the stock on or after the 31st of January will not receive this dividend, which will be paid on the 21st of February.
Motilal Oswal Financial Services’s next dividend payment will be ₹4.00 per share, on the back of last year when the company paid a total of ₹8.50 to shareholders. Last year’s total dividend payments show that Motilal Oswal Financial Services has a trailing yield of 1.0% on the current share price of ₹826.55. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Motilal Oswal Financial Services can afford its dividend, and if the dividend could grow.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Motilal Oswal Financial Services is paying out just 11% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
Generally speaking, the lower a company’s payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That’s why it’s comforting to see Motilal Oswal Financial Services’s earnings have been skyrocketing, up 70% per annum for the past five years.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. In the past ten years, Motilal Oswal Financial Services has increased its dividend at approximately 27% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
From a dividend perspective, should investors buy or avoid Motilal Oswal Financial Services? Companies like Motilal Oswal Financial Services that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. Perhaps even more importantly – this can sometimes signal management is focused on the long term future of the business. We think this is a pretty attractive combination, and would be interested in investigating Motilal Oswal Financial Services more closely.
Curious what other investors think of Motilal Oswal Financial Services? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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