NSE: M&MFIN – Mahindra & Mahindra Financial Services Limited, a non-banking finance company, provides asset finance in rural and semi-urban areas of India.
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Mahindra & Mahindra Financial Services (NSE: M&MFIN) Is Increasing Its Dividend To Rs 3.60.
The dividend of Mahindra & Mahindra Financial Services Limited (NSE:M&MFIN) is set to increase to Rs 3.60 on August 27th. This makes the dividend yield 2.0% to 2.0% that shareholders will be delighted with.
Mahindra & Mahindra Financial Services’ Dividend Is Well Covered By Earnings.
We want to see a strong dividend yield, but it doesn’t matter if the payments aren’t sustainable. Mahindra & Mahindra Financial Services is easily generating enough earnings to cover its dividend, but weak cash flow is disappointing. Generally, we believe cash flow is more important than earnings, so relying on the sustainability of this dividend would be prudent.
EPS is expected to rise 56.1% next year. Assuming the dividend continues following recent trends, the payout ratio could be 24% by next year, which we believe is in a fairly sustainable range.
The company has a long dividend track best ever, but it’s not good with past cuts. The first annual payment since 2012 was Rs 2.80 compared to the most recent annual payment of Rs 3.60. This means that the company has improved its distribution at a rate of approximately 2.5% per year over that period. Dividends have had some fluctuations, so it’s important to remember that even if the dividend is raised this year, it has been cut in the past.
Dividend Growth Can Be Difficult To Achieve
It’s even more important to ensure earnings-per-share grow with a relatively volatile dividend. Unfortunately, Mahindra & Mahindra Financial Services’ earnings-per-share have been essentially flat over the past five years, which means the dividend may not increase every year. If Mahindra & Mahindra Financial Services are struggling to find viable investments, there is always an option to pay more to shareholders by increasing the dividend ratio.
To Sum Up
Overall, this probably isn’t a great income stock, despite the current dividend hike. It is difficult to sustain dividend payments due to insufficient cash flow. Overall, we don’t think this company has good earnings stocks.
Market movements prove how highly a consistent dividend policy is valued compared to more unpredictable ones. Meanwhile, contempt the importance of dividend payments, they aren’t the only factor readers should be aware of when evaluating a company. For example, we found 2 warning signs you need to know about Mahindra & Mahindra Financial Services, one of which doesn’t sit well with us. If you’re a dividend investor, you may want to see our hand-picked list of high-yielding dividend stocks.
Mahindra & Mahindra Financial Services Intrinsic Value: Estimated FCF Calculation
Since intrinsic value calculations based on Discounted Cash Flow Intrinsic Value: DCF (FCF-based) or Discounted Revenue Intrinsic Value: DCF (earnings-based) do not apply to companies that do not have consistent revenues and earnings. GuruFocus is a normalized free-based valuation. Developed a model. The company’s cash flow and book value.
Details on how to calculate the intrinsic value of a stock are detailed here.
- This method smooths out free cash flow over the past 6-7 years, multiplies the result by a growth multiple. And also adds a percentage of total shareholders’ equity.
- Intrinsic Value: Expected FCF = (Growth Multiple * Free Cash Flow (six-year average) + 0.8 * Total Shareholders’ Equity (most recent). Shares outstanding (diluted average)
- When the total shareholder equity is negative, the following formula is used (see explanation section below for reasons):
- Intrinsic Value: Expected FCF = ( Growth Multiple * Free Cash Flow (six-year average) + Total Shareholders’ Equity (most recent) / 0.8 ) / Shares outstanding (diluted average)
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