Yahoo Finance Morgan Advanced Materials (LON:MGAM) Will Pay A Larger Dividend Than Last Year At £0.053
Morgan Advanced Materials plc (LON:MGAM) will increase its dividend from last year's comparable payment on the 18th of November to £0.053. This takes the dividend yield to 4.5%, which shareholders will be pleased with.
See our latest analysis for Morgan Advanced Materials
Morgan Advanced Materials' Dividend Is Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Morgan Advanced Materials was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. The company is clearly earning enough to pay this type of dividend, but it is definitely focused on returning cash to shareholders, rather than growing the business.
Looking forward, earnings per share is forecast to rise by 29.1% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 31% by next year, which is in a pretty sustainable range.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was £0.0925 in 2012, and the most recent fiscal year payment was £0.112. This works out to be a compound annual growth rate (CAGR) of approximately 1.9% a year over that time. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
Dividend Growth Is Doubtful
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. In the last five years, Morgan Advanced Materials' earnings per share has shrunk at approximately 5.9% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
Our Thoughts On Morgan Advanced Materials' Dividend
Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Morgan Advanced Materials is earning enough to cover the dividend, we are generally unimpressed with its future prospects. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Morgan Advanced Materials that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
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