Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. MphasiS Limited (NSEI:MPHASIS) has returned to shareholders over the past 10 years, an average dividend yield of 2.00% annually. Does MphasiS tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. See our latest analysis for MphasiS
5 checks you should use to assess a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
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Is its annual yield among the top 25% of dividend-paying companies?
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Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
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Has dividend per share amount increased over the past?
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Is is able to pay the current rate of dividends from its earnings?
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Will it be able to continue to payout at the current rate in the future?
How does MphasiS fare?
MphasiS has a trailing twelve-month payout ratio of 42.99%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 47.41%, leading to a dividend yield of 2.77%. Moreover, EPS should increase to ₹46.75. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward. If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. Whilst its per-share payments have increased during the past 10 years, there has been some hiccups. Investors have seen reductions in the dividend per share in the past, although, it has picked up again. Compared to its peers, MphasiS has a yield of 2.00%, which is high for IT stocks but still below the low risk savings rate.
Next Steps:
Whilst there are few things you may like about MphasiS from a dividend stock perspective, the truth is that overall it probably is not the best choice for a dividend investor. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three essential aspects you should further research:
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1. Future Outlook: What are well-informed industry analysts predicting for MPHASIS’s future growth? Take a look at our free research report of analyst consensus for MPHASIS’s outlook.
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2. Valuation: What is MPHASIS worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether MPHASIS is currently mispriced by the market.
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3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.