MSTC Limited (NSE: MSTCLTD) announced that it will increase its dividend on October 28 to 4.40. This results in the dividend yield being 1.6%, which is above the industry average.
See our latest review for MSTC
MSTC dividend is well covered by profits
We like to see robust dividend yields, but it doesn’t matter if the payout isn’t sustainable. However, prior to this announcement, MSTC’s dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is used to help it grow.
Going forward, earnings per share could increase by 16.4% over the next year if the trend of recent years continues. Assuming the dividend continues on recent trends, we think the payout ratio could be 19% by next year, which is in a fairly sustainable range.
MSTC continues to build its track record
It is not possible for us to make a retrospective judgment on the sole basis of a brief payment history. This doesn’t mean the company can’t pay a good dividend, just that we want to wait until it can prove itself.
The dividend seems likely to increase
Some investors will be eager to buy a portion of the company’s stock based on its dividend history. MSTC has impressed us by increasing BPA by 16% per year over the past five years. The growth in EPS bodes well for the dividend, as does the low payout ratio the company is currently reporting.
MSTC looks like a great dividend-paying stock
In summary, it is always positive to see the dividend increase and we are particularly satisfied with its overall sustainability. The company easily earns enough to cover its dividend payments and it’s great to see that those profits translate into cash flow. Considering all of this, this looks like a good dividend opportunity.
Market movements testify to the high value of a coherent dividend policy compared to a more unpredictable one. Still, there are a host of other factors that investors need to consider, aside from dividend payments, when analyzing a business. For example, we have selected 1 warning sign for MSTC that investors should consider. We have also set up a list of global stocks with a solid dividend.
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