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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Motilal Oswal Financial Services Limited (NSE:MOTILALOFS) is about to go ex-dividend in just 3 days. Ex-dividend means that investors that purchase the stock on or after the 24th of July will not receive this dividend, which will be paid on the 29th of August.
Motilal Oswal Financial Services's next dividend payment will be ₹4.50 per share, on the back of last year when the company paid a total of ₹8.50 to shareholders. Based on the last year's worth of payments, Motilal Oswal Financial Services has a trailing yield of 1.4% on the current stock price of ₹605.5. 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.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Motilal Oswal Financial Services paying out a modest 42% of its earnings.
Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. It's encouraging to see Motilal Oswal Financial Services has grown its earnings rapidly, up 48% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Motilal Oswal Financial Services has lifted its dividend by approximately 27% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Is Motilal Oswal Financial Services worth buying for its dividend? Companies like Motilal Oswal Financial Services that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. In summary, Motilal Oswal Financial Services appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
Keen to explore more data on Motilal Oswal Financial Services's financial performance? Check out our visualisation of its historical revenue and earnings growth.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.