MOIL (NSE:MOIL) shareholders will receive a lower dividend than last year

MOIL Limited (NSE: MOIL) dividend is reduced from last year’s payout covering the same period to ₹3.00 on Oct 23. This payment brings the dividend yield to 3.6%, providing only a modest boost to overall returns.

Check out our latest analysis for MOIL

MOIL’s dividend is well covered by earnings

The dividend yield is a little low, but the sustainability of payouts is also an important part of valuing an income stock. However, prior to this announcement, MOIL was fairly comfortably covering its dividend with earnings and paying over 75% of its free cash flow to shareholders. The company returns much of its money to shareholders, which means it is not used to grow the business.

Over the next year, EPS could rise 15.1% if recent trends continue. Assuming the dividend continues on recent trends, we think the payout ratio could be 28% by next year, which is in a fairly sustainable range.

NSEI: MOIL Historic Dividend August 28, 2022

Dividend volatility

Although the company has a long history of dividends, it has been cut at least once in the past 10 years. As of 2012, the annual payment at the time was ₹3.25, compared to the most recent annual payment of ₹6.00. This means that it increased its distributions by 6.3% per year during this period. We’ve seen cuts in the past, so while growth looks promising, we’d be a bit cautious about its track record.

The dividend should increase

Earnings per share growth could be a mitigating factor given past dividend fluctuations. MOIL has impressed us by increasing EPS by 15% per year over the past five years. EPS growth bodes well for the dividend, as does the low payout ratio the company is currently reporting.

In summary

Overall, the dividend seems to have been a bit high, which is why it has now been reduced. Although MOIL is earning enough to cover the dividend, we’re generally not impressed with its future prospects. We don’t think MOIL is a great stock to add to your portfolio if income is your priority.

Companies with a stable dividend policy are likely to enjoy greater investor interest than those that suffer from a more inconsistent approach. Yet investors must consider a host of other factors, aside from dividend payments, when analyzing a company. For example, we have identified 2 warning signs for MOIL (1 makes us a little uneasy!) that you should be aware of before investing. Looking for more high yield dividend ideas? Try our collection of strong dividend payers.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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