Yahoo Finance Macquarie Group's (ASX:MQG) Shareholders Will Receive A Bigger Dividend Than Last Year
Macquarie Group Limited's (ASX:MQG) dividend will be increasing to AU$3.50 on 4th of July. Based on the announced payment, the dividend yield for the company will be 3.4%, which is fairly typical for the industry.
Check out our latest analysis for Macquarie Group
Macquarie Group's Earnings Easily Cover the Distributions
Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, Macquarie Group was quite comfortably earning enough to cover the dividend. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
Looking forward, earnings per share is forecast to fall by 12.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio could be 60%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Dividend Volatility
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from AU$1.75 in 2012 to the most recent annual payment of AU$6.22. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. Macquarie Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Macquarie Group has seen EPS rising for the last five years, at 13% per annum. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.
Macquarie Group Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Macquarie Group is a strong income stock thanks to its track record and growing earnings. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for Macquarie Group (1 is significant!) that you should be aware of before investing. Is Macquarie Group not quite the opportunity you were looking for? Why not check out our selection of top 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.
