Here's What We Like About Magadh Sugar & Energy's (NSE:MAGADSUGAR) Upcoming Dividend
Readers hoping to buy Magadh Sugar & Energy Limited (NSE:MAGADSUGAR) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a 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. Accordingly, Magadh Sugar & Energy investors that purchase the stock on or after the 17th of July will not receive the dividend, which will be paid on the 28th of August.
The company's upcoming dividend is ₹12.50 a share, following on from the last 12 months, when the company distributed a total of ₹12.50 per share to shareholders. Based on the last year's worth of payments, Magadh Sugar & Energy has a trailing yield of 2.5% on the current stock price of ₹506.75. If you buy this business for its dividend, you should have an idea of whether Magadh Sugar & Energy's dividend is reliable and sustainable. As a result, readers should always check whether Magadh Sugar & Energy has been able to grow its dividends, or if the dividend might be cut.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see Magadh Sugar & Energy paying out a modest 28% of its earnings. 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. Fortunately, it paid out only 28% of its free cash flow in the past year.
It's positive to see that Magadh Sugar & Energy'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.
See our latest analysis for Magadh Sugar & Energy
Click here to see how much of its profit Magadh Sugar & Energy paid out over the last 12 months.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Magadh Sugar & Energy's earnings per share have risen 19% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Magadh Sugar & Energy has delivered 27% dividend growth per year on average over the past nine years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Is Magadh Sugar & Energy an attractive dividend stock, or better left on the shelf? Magadh Sugar & Energy has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past nine years, but the conservative payout ratio makes the current dividend look sustainable. Magadh Sugar & Energy looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
On that note, you'll want to research what risks Magadh Sugar & Energy is facing. For example - Magadh Sugar & Energy has 4 warning signs we think you should be aware of.
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.