Maithan Alloys (NSE:MAITHANALL) Will Pay A Dividend Of ₹6.00

Maithan Alloys Limited (NSE:MAITHANALL) has announced that it will pay a dividend of ₹6.00 per share on the 28th of October. This means the annual payment will be 0.5% of the current stock price, which is lower than the industry average.

View our latest analysis for Maithan Alloys

Maithan Alloys' Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Maithan Alloys' earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

If the trend of the last few years continues, EPS will grow by 6.5% over the next 12 months. If the dividend continues on this path, the payout ratio could be 4.7% by next year, which we think can be pretty sustainable going forward.

Maithan Alloys Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2014, the annual payment back then was ₹1.00, compared to the most recent full-year payment of ₹6.00. This works out to be a compound annual growth rate (CAGR) of approximately 20% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Maithan Alloys Could Grow Its Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Maithan Alloys has grown earnings per share at 6.5% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

Our Thoughts On Maithan Alloys' Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Maithan Alloys' payments, as there could be some issues with sustaining them into the future. While Maithan Alloys is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

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. For example, we've identified 2 warning signs for Maithan Alloys (1 is concerning!) that you should be aware of before investing. Is Maithan Alloys not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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