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MEP Infrastructure Developers Limited (NSE:MEP) is about to trade ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 29th of August will not receive the dividend, which will be paid on the 6th of October.
MEP Infrastructure Developers's upcoming dividend is ₹0.30 a share, following on from the last 12 months, when the company distributed a total of ₹0.30 per share to shareholders. Based on the last year's worth of payments, MEP Infrastructure Developers stock has a trailing yield of around 1.1% on the current share price of ₹28.3. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether MEP Infrastructure Developers can afford its dividend, and if the dividend could grow.
See our latest analysis for MEP Infrastructure Developers
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. MEP Infrastructure Developers has a low and conservative payout ratio of just 16% of its income after tax. A useful secondary check can be to evaluate whether MEP Infrastructure Developers generated enough free cash flow to afford its dividend. The good news is it paid out just 1.1% of its free cash flow in the last year.
It's positive to see that MEP Infrastructure Developers's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much of its profit MEP Infrastructure Developers paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see MEP Infrastructure Developers has grown its earnings rapidly, up 37% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, MEP Infrastructure Developers looks like a promising growth company.
MEP Infrastructure Developers also issued more than 5% of its market cap in new stock during the past year, which we feel is likely to hurt its dividend prospects in the long run. It's hard to grow dividends per share when a company keeps creating new shares.