Mahindra Logistics (NSE:MAHLOG) Will Pay A Smaller Dividend Than Last Year

Mahindra Logistics Limited (NSE:MAHLOG) has announced it will be reducing its dividend payable on the 28th of August to ₹2.00. This means that the dividend yield is 0.4%, which is a bit low when comparing to other companies in the industry.

See our latest analysis for Mahindra Logistics

Mahindra Logistics' Earnings Easily Cover the Distributions

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Mahindra Logistics was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 120.9%. If the dividend continues on this path, the payout ratio could be 19% by next year, which we think can be pretty sustainable going forward.

Mahindra Logistics' Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. Since 2018, the first annual payment was ₹1.50, compared to the most recent full-year payment of ₹2.00. This means that it has been growing its distributions at 7.5% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

Dividend Growth Is Doubtful

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Mahindra Logistics has seen earnings per share falling at 5.1% per year over the last five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On Mahindra Logistics' Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. 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 be a touch cautious of relying on this stock primarily for the dividend income.

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 instance, we've picked out 2 warning signs for Mahindra Logistics that investors should take into consideration. 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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