Mahindra Lifespace Developers (NSE:MAHLIFE) Is Increasing Its Dividend To ₹2.80

The board of Mahindra Lifespace Developers Limited (NSE:MAHLIFE) has announced that it will be increasing its dividend by 5.7% on the 24th of August to ₹2.80, up from last year's comparable payment of ₹2.65. This will take the dividend yield to an attractive 0.8%, providing a nice boost to shareholder returns.

We've discovered 4 warning signs about Mahindra Lifespace Developers. View them for free.

Mahindra Lifespace Developers' Future Dividend Projections Appear Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend made up quite a large portion of free cash flows, and this was made worse by the lack of free cash flows. We think that this practice can make the dividend quite risky in the future.

According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 18%, which would make us comfortable with the dividend's sustainability, despite the levels currently being elevated.

See our latest analysis for Mahindra Lifespace Developers

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was ₹2.00, compared to the most recent full-year payment of ₹2.65. This implies that the company grew its distributions at a yearly rate of about 2.9% over that duration. 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.

Dividend Growth Could Be Constrained

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Mahindra Lifespace Developers has seen EPS rising for the last five years, at 50% per annum. EPS is growing rapidly, although the company is also paying out a large portion of its profits as dividends. If earnings keep growing, the dividend may be sustainable, but generally we'd prefer to see a fast growing company reinvest in further growth.

The Dividend Could Prove To Be Unreliable

Overall, we always like to see the dividend being raised, but we don't think Mahindra Lifespace Developers will make a great income stock. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We don't think Mahindra Lifespace Developers is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Mahindra Lifespace Developers has 4 warning signs (and 2 which are significant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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