MOIL (NSE:MOIL) Will Pay A Larger Dividend Than Last Year At ₹4.02

MOIL Limited's (NSE:MOIL) periodic dividend will be increasing on the 10th of March to ₹4.02, with investors receiving 15% more than last year's ₹3.50. This takes the annual payment to 2.0% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for MOIL

MOIL's Projected Earnings Seem Likely To Cover Future Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Prior to this announcement, MOIL was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

Over the next year, EPS is forecast to expand by 106.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 19%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the dividend has gone from ₹3.75 total annually to ₹6.05. This means that it has been growing its distributions at 4.9% per annum over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

MOIL May Find It Hard To Grow The Dividend

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, MOIL has only grown its earnings per share at 3.8% per annum over the past five years. Growth of 3.8% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On MOIL's Dividend

In summary, while it's always good to see the dividend being raised, we don't think MOIL's payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments MOIL has been making. We don't think MOIL is a great stock to add to your portfolio if income is your focus.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for MOIL that investors need to be conscious of moving forward. Is MOIL 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.