Mahindra Logistics (NSE:MAHLOG) Is Due To Pay A Dividend Of ₹2.50

The board of Mahindra Logistics Limited (NSE:MAHLOG) has announced that it will pay a dividend of ₹2.50 per share on the 20th of August. This payment means that the dividend yield will be 0.8%, which is around the industry average.

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Mahindra Logistics' Long-term Dividend Outlook appears Promising

Solid dividend yields are great, but they only really help us if the payment is sustainable. Mahindra Logistics is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 28%, which makes us pretty comfortable with the sustainability of the dividend.

See our latest analysis for Mahindra Logistics

Mahindra Logistics Is Still Building Its Track Record

It is great to see that Mahindra Logistics has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of ₹1.50 in 2018 to the most recent total annual payment of ₹2.50. This implies that the company grew its distributions at a yearly rate of about 7.6% over that duration. Mahindra Logistics has been growing its dividend at a decent rate, and the payments have been stable. However, the payment history is very short, so there is no evidence yet that the dividend can be sustained over a full economic cycle.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. Earnings per share has been sinking by 54% over the last five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

Mahindra Logistics' Dividend Doesn't Look Sustainable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Mahindra Logistics' payments, as there could be some issues with sustaining them into the future. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Mahindra Logistics is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for Mahindra Logistics (1 makes us a bit uncomfortable!) that you should be aware of before investing. Is Mahindra Logistics 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.