Stock Analysis

Be Sure To Check Out Mahanagar Gas Limited (NSE:MGL) Before It Goes Ex-Dividend

NSEI:MGL
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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Mahanagar Gas Limited (NSE:MGL) is about to trade ex-dividend in the next 2 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Mahanagar Gas investors that purchase the stock on or after the 3rd of February will not receive the dividend, which will be paid on the 27th of February.

The company's next dividend payment will be ₹12.00 per share, and in the last 12 months, the company paid a total of ₹30.00 per share. Calculating the last year's worth of payments shows that Mahanagar Gas has a trailing yield of 2.3% on the current share price of ₹1303.50. If you buy this business for its dividend, you should have an idea of whether Mahanagar Gas's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Mahanagar Gas

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Mahanagar Gas paying out a modest 28% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out more than half (53%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Mahanagar Gas's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
NSEI:MGL Historic Dividend January 31st 2025

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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Mahanagar Gas's earnings per share have risen 14% per annum over the last five years. Mahanagar Gas is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, eight years ago, Mahanagar Gas has lifted its dividend by approximately 15% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Has Mahanagar Gas got what it takes to maintain its dividend payments? Earnings per share have grown at a nice rate in recent times and over the last year, Mahanagar Gas paid out less than half its earnings and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.

Ever wonder what the future holds for Mahanagar Gas? See what the 28 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.