Interested In Motherson Sumi Wiring India's (NSE:MSUMI) Upcoming ₹0.50 Dividend? You Have Two Days Left

Motherson Sumi Wiring India Limited (NSE:MSUMI) stock is about to trade ex-dividend in 2 days. The ex-dividend date is usually set to be two business days 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 at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Thus, you can purchase Motherson Sumi Wiring India's shares before the 28th of March in order to receive the dividend, which the company will pay on the 20th of April.

The company's next dividend payment will be ₹0.50 per share. Last year, in total, the company distributed ₹0.80 to shareholders. Looking at the last 12 months of distributions, Motherson Sumi Wiring India has a trailing yield of approximately 1.4% on its current stock price of ₹55.96. 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 investigate whether Motherson Sumi Wiring India can afford its dividend, and if the dividend could grow.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Motherson Sumi Wiring India paid out 55% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Motherson Sumi Wiring India generated enough free cash flow to afford its dividend. Dividends consumed 61% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

View our latest analysis for Motherson Sumi Wiring India

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

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 earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Motherson Sumi Wiring India earnings per share are up 3.7% per annum over the last five years. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Motherson Sumi Wiring India has delivered 9.6% dividend growth per year on average over the past three years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is Motherson Sumi Wiring India an attractive dividend stock, or better left on the shelf? Earnings per share have been growing modestly and Motherson Sumi Wiring India paid out a bit over half of its earnings and free cash flow last year. In summary, while it has some positive characteristics, we're not inclined to race out and buy Motherson Sumi Wiring India today.

Ever wonder what the future holds for Motherson Sumi Wiring India? See what the 11 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.