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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 Mahindra Logistics Limited (NSE:MAHLOG) is about to go ex-dividend in just 3 days. Investors can purchase shares before the 23rd of July in order to be eligible for this dividend, which will be paid on the 31st of August.
Mahindra Logistics's next dividend payment will be ₹1.80 per share, and in the last 12 months, the company paid a total of ₹1.80 per share. Calculating the last year's worth of payments shows that Mahindra Logistics has a trailing yield of 0.4% on the current share price of ₹449.2. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for Mahindra Logistics
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Mahindra Logistics has a low and conservative payout ratio of just 15% of its income after tax. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. What's good is that dividends were well covered by free cash flow, with the company paying out 21% of its cash flow last year.
It's positive to see that Mahindra Logistics'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.
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. Fortunately for readers, Mahindra Logistics's earnings per share have been growing at 14% a year for the past five years.
The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.