Maharashtra Seamless (NSE:MAHSEAMLES) Is Increasing Its Dividend To ₹3.50

Maharashtra Seamless Limited (NSE:MAHSEAMLES) has announced that it will be increasing its dividend on the 28th of October to ₹3.50. Despite this raise, the dividend yield of 1.1% is only a modest boost to shareholder returns.

View our latest analysis for Maharashtra Seamless

Maharashtra Seamless' Earnings Easily Cover the Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. However, Maharashtra Seamless' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Unless the company can turn things around, EPS could fall by 25.8% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 18%, which is definitely feasible to continue.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2011, the dividend has gone from ₹6.00 to ₹3.50. This works out to be a decline of approximately 5.2% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

Dividend Growth Potential Is Shaky

Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Maharashtra Seamless' EPS has fallen by approximately 26% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Our Thoughts On Maharashtra Seamless' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Maharashtra Seamless' payments are rock solid. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Maharashtra Seamless (of which 1 is a bit unpleasant!) you should know about. Looking for more high-yielding dividend ideas? Try our curated list of 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.
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