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It looks like Mukta Arts Limited (NSE:MUKTAARTS) is about to go ex-dividend in the next 3 days. Ex-dividend means that investors that purchase the stock on or after the 20th of August will not receive this dividend, which will be paid on the 27th of September.
Mukta Arts's next dividend payment will be ₹1.25 per share. Last year, in total, the company distributed ₹1.25 to shareholders. Calculating the last year's worth of payments shows that Mukta Arts has a trailing yield of 3.2% on the current share price of ₹38.5. If you buy this business for its dividend, you should have an idea of whether Mukta Arts's dividend is reliable and sustainable. So we need to investigate whether Mukta Arts can afford its dividend, and if the dividend could grow.
View our latest analysis for Mukta Arts
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. That's why it's good to see Mukta Arts paying out a modest 42% of its earnings.
Click here to see how much of its profit Mukta Arts 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. That's why it's comforting to see Mukta Arts's earnings have been skyrocketing, up 66% per annum for the past five years. Mukta Arts is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Mukta Arts has lifted its dividend by approximately 2.3% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Mukta Arts is keeping back more of its profits to grow the business.
To Sum It Up
Is Mukta Arts an attractive dividend stock, or better left on the shelf? Mukta Arts has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past ten years, but the conservative payout ratio makes the current dividend look sustainable. There's a lot to like about Mukta Arts, and we would prioritise taking a closer look at it.