Mishra Dhatu Nigam's (NSE:MIDHANI) Dividend Will Be Reduced To ₹1.54

Mishra Dhatu Nigam Limited (NSE:MIDHANI) is reducing its dividend from last year's comparable payment to ₹1.54 on the 29th of October. Based on this payment, the dividend yield will be 1.5%, which is lower than the average for the industry.

View our latest analysis for Mishra Dhatu Nigam

Mishra Dhatu Nigam's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Mishra Dhatu Nigam is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS could expand by 6.8% if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which is in the range that makes us comfortable with the sustainability of the dividend.

Mishra Dhatu Nigam's Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. The annual payment during the last 4 years was ₹2.10 in 2018, and the most recent fiscal year payment was ₹3.10. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Mishra Dhatu Nigam Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that Mishra Dhatu Nigam has grown earnings per share at 6.8% 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 Mishra Dhatu Nigam's Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While Mishra Dhatu Nigam is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Mishra Dhatu Nigam that investors should take into consideration. Is Mishra Dhatu Nigam not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.