Motilal Oswal Financial Services (NSE:MOTILALOFS) Is Due To Pay A Dividend Of ₹3.00

The board of Motilal Oswal Financial Services Limited (NSE:MOTILALOFS) has announced that it will pay a dividend of ₹3.00 per share on the 10th of August. Including this payment, the dividend yield on the stock will be 1.4%, which is a modest boost for shareholders' returns.

View our latest analysis for Motilal Oswal Financial Services

Motilal Oswal Financial Services' 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. Motilal Oswal Financial Services is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Over the next year, EPS is forecast to expand by 16.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 16%, which is in the range that makes us comfortable with the sustainability of the dividend.

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 ₹1.50 in 2013 to the most recent total annual payment of ₹10.00. This implies that the company grew its distributions at a yearly rate of about 21% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

We Could See Motilal Oswal Financial Services' 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. Motilal Oswal Financial Services has seen EPS rising for the last five years, at 7.9% per annum. Motilal Oswal Financial Services definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Our Thoughts On Motilal Oswal Financial Services' Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 2 warning signs for Motilal Oswal Financial Services you should be aware of, and 1 of them doesn't sit too well with us. Is Motilal Oswal Financial Services not quite the opportunity you were looking for? Why not check out our selection of top 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.