Mangalam Cement Limited (NSE:MANGLMCEM) Looks Like A Good Stock, And It’s Going Ex-Dividend Soon

Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see Mangalam Cement Limited (NSE:MANGLMCEM) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before a company’s record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn’t show on the record date. In other words, investors can purchase Mangalam Cement’s shares before the 25th of August in order to be eligible for the dividend, which will be paid on the 3rd of October.

The company’s next dividend payment will be ₹1.50 per share. Last year, in total, the company distributed ₹1.50 to shareholders. Calculating the last year’s worth of payments shows that Mangalam Cement has a trailing yield of 0.4% on the current share price of ₹336.8. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Mangalam Cement has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Mangalam Cement

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Mangalam Cement paid out just 5.8% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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 6.3% of its cash flow last year.

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.

Click here to see how much of its profit Mangalam Cement paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we’re glad to see Mangalam Cement’s earnings per share have risen 13% 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. 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.

The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. Mangalam Cement has seen its dividend decline 13% per annum on average over the past 10 years, which is not great to see. Mangalam Cement is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It’s unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

Final Takeaway

Should investors buy Mangalam Cement for the upcoming dividend? It’s great that Mangalam Cement is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It’s disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There’s a lot to like about Mangalam Cement, and we would prioritise taking a closer look at it.

So while Mangalam Cement looks good from a dividend perspective, it’s always worthwhile being up to date with the risks involved in this stock. Be aware that Mangalam Cement is showing 4 warning signs in our investment analysis, and 1 of those shouldn’t be ignored…

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.