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 Multi Commodity Exchange of India Limited (NSE:MCX) is about to go ex-dividend in just 3 days. You will need to purchase shares before the 12th of September to receive the dividend, which will be paid on the 20th of October.
Multi Commodity Exchange of India's next dividend payment will be ₹20.00 per share, and in the last 12 months, the company paid a total of ₹20.00 per share. Based on the last year's worth of payments, Multi Commodity Exchange of India has a trailing yield of 2.3% on the current stock price of ₹885.25. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
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. Multi Commodity Exchange of India paid out 56% of its earnings to investors last year, a normal payout level for most businesses.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Multi Commodity Exchange of India earnings per share are up 3.5% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Multi Commodity Exchange of India has seen its dividend decline 2.6% per annum on average over the past 7 years, which is not great to see. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
The Bottom Line
Has Multi Commodity Exchange of India got what it takes to maintain its dividend payments? Multi Commodity Exchange of India has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.
Wondering what the future holds for Multi Commodity Exchange of India? See what the five 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 dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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