Only Four Days Left To Cash In On Mawana Sugars' (NSE:MAWANASUG) Dividend

Readers hoping to buy Mawana Sugars Limited (NSE:MAWANASUG) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. Thus, you can purchase Mawana Sugars' shares before the 22nd of November in order to receive the dividend, which the company will pay on the 8th of December.

The company's next dividend payment will be ₹3.00 per share, on the back of last year when the company paid a total of ₹6.00 to shareholders. Last year's total dividend payments show that Mawana Sugars has a trailing yield of 6.0% on the current share price of ₹100.40. If you buy this business for its dividend, you should have an idea of whether Mawana Sugars's dividend is reliable and sustainable. So we need to investigate whether Mawana Sugars can afford its dividend, and if the dividend could grow.

See our latest analysis for Mawana Sugars

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. Fortunately Mawana Sugars's payout ratio is modest, at just 42% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 49% of the free cash flow it generated, which is a comfortable payout ratio.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Mawana Sugars paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're not enthused to see that Mawana Sugars's earnings per share have remained effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Mawana Sugars has delivered 26% dividend growth per year on average over the past three years.

Final Takeaway

Is Mawana Sugars an attractive dividend stock, or better left on the shelf? Earnings per share have been flat, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend gets cut. In summary, while it has some positive characteristics, we're not inclined to race out and buy Mawana Sugars today.

On that note, you'll want to research what risks Mawana Sugars is facing. Our analysis shows 2 warning signs for Mawana Sugars that we strongly recommend you have a look at before investing in the company.

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.