Mangalore Chemicals & Fertilizers (NSE:MANGCHEFER) Has Announced That It Will Be Increasing Its Dividend To ₹1.00

Mangalore Chemicals & Fertilizers Limited (NSE:MANGCHEFER) has announced that it will be increasing its dividend on the 16th of October to ₹1.00. This will take the annual payment from 1.4% to 1.4% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Mangalore Chemicals & Fertilizers

Mangalore Chemicals & Fertilizers' Earnings Easily Cover the Distributions

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, prior to this announcement, Mangalore Chemicals & Fertilizers' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share could rise by 57.0% over the next year if the trend from the last few years continues. If the dividend continues on this path, the payout ratio could be 10% by next year, which we think can be pretty sustainable going forward.

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 ₹1.20 to ₹1.00. The dividend has shrunk at around 1.8% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

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. We are encouraged to see that Mangalore Chemicals & Fertilizers has grown earnings per share at 57% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Mangalore Chemicals & Fertilizers Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Mangalore Chemicals & Fertilizers has 2 warning signs (and 1 which is significant) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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