Mahindra Logistics (NSE:MAHLOG) Will Pay A Dividend Of ₹2.50

Mahindra Logistics Limited's (NSE:MAHLOG) investors are due to receive a payment of ₹2.50 per share on 21st of August. This payment means the dividend yield will be 0.5%, which is below the average for the industry.

See our latest analysis for Mahindra Logistics

Mahindra Logistics' Earnings Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. While Mahindra Logistics is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into 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.

Analysts expect a massive rise in earnings per share in the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 7.3%, which makes us pretty comfortable with the sustainability of the dividend.

Mahindra Logistics Is Still Building Its Track Record

Mahindra Logistics' dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The dividend has gone from an annual total of ₹1.50 in 2018 to the most recent total annual payment of ₹2.50. This works out to be a compound annual growth rate (CAGR) of approximately 8.9% a year over that time. Mahindra Logistics has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

Dividend Growth Potential Is Shaky

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Mahindra Logistics' EPS has declined at around 42% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. 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

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would probably look elsewhere for an income investment.

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. For example, we've identified 2 warning signs for Mahindra Logistics (1 is a bit concerning!) 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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