Mangalore Chemicals & Fertilizers (NSE:MANGCHEFER) Is Increasing Its Dividend To ₹1.00

Mangalore Chemicals & Fertilizers Limited's (NSE:MANGCHEFER) dividend will be increasing to ₹1.00 on 16th of October. This will take the dividend yield to an attractive 1.4%, providing a nice boost to shareholder returns.

View our latest analysis for Mangalore Chemicals & Fertilizers

Mangalore Chemicals & Fertilizers' Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Mangalore Chemicals & Fertilizers was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 57.0% over the next 12 months. 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

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from ₹1.20 in 2011 to the most recent annual payment of ₹1.00. The dividend has shrunk at around 1.8% a year during that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Mangalore Chemicals & Fertilizers has impressed us by growing EPS 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

Overall, a dividend increase is always good, and we think that Mangalore Chemicals & Fertilizers is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for Mangalore Chemicals & Fertilizers you should be aware of, and 1 of them is potentially serious. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

When trading Mangalore Chemicals & Fertilizers or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.