Mawana Sugars (NSE:MAWANASUG) Has Re-Affirmed Its Dividend Of ₹3.00

The board of Mawana Sugars Limited (NSE:MAWANASUG) has announced that it will pay a dividend on the 29th of October, with investors receiving ₹3.00 per share. The dividend yield will be 2.5% based on this payment which is still above the industry average.

See our latest analysis for Mawana Sugars

Mawana Sugars' Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before making this announcement, Mawana Sugars was earning enough to cover the dividend, but it wasn't generating any free cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

EPS is set to fall by 40.8% over the next 12 months if recent trends continue. If recent patterns in the dividend continue, we could see the payout ratio reaching 76% in the next 12 months which is on the higher end of the range we would say is sustainable.

Mawana Sugars Is Still Building Its Track Record

Without a track record of dividend payments, we can't make a judgement on how stable it has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. However, things aren't all that rosy. Mawana Sugars' EPS has fallen by approximately 41% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Mawana Sugars' Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Mawana Sugars' payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

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. For example, we've identified 7 warning signs for Mawana Sugars (3 are a bit concerning!) 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.

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