Mindteck (India) Limited (NSE:MINDTECK) Looks Interesting, And It's About To Pay A Dividend

Readers hoping to buy Mindteck (India) Limited (NSE:MINDTECK) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Mindteck (India)'s shares on or after the 2nd of August, you won't be eligible to receive the dividend, when it is paid on the 8th of September.

The company's next dividend payment will be ₹1.00 per share, on the back of last year when the company paid a total of ₹1.00 to shareholders. Calculating the last year's worth of payments shows that Mindteck (India) has a trailing yield of 0.2% on the current share price of ₹421.10. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Mindteck (India)

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Mindteck (India) has a low and conservative payout ratio of just 9.1% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 12% of its cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Mindteck (India) paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Mindteck (India) has grown its earnings rapidly, up 58% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Mindteck (India) looks like a promising growth company.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Mindteck (India)'s dividend payments are effectively flat on where they were 10 years ago.

Final Takeaway

Has Mindteck (India) got what it takes to maintain its dividend payments? Mindteck (India) has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past 10 years, but the conservative payout ratio makes the current dividend look sustainable. It's a promising combination that should mark this company worthy of closer attention.

So while Mindteck (India) looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example - Mindteck (India) has 1 warning sign we think you should be aware of.

If you're in the market for strong dividend payers, we recommend checking 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.

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