Mayr-Melnhof Karton (VIE:MMK) Is Paying Out A Larger Dividend Than Last Year

Mayr-Melnhof Karton AG (VIE:MMK) has announced that it will be increasing its dividend on the 11th of May to €3.50. Based on the announced payment, the dividend yield for the company will be 2.1%, which is fairly typical for the industry.

View our latest analysis for Mayr-Melnhof Karton

Mayr-Melnhof Karton's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Mayr-Melnhof Karton was paying a whopping 327% as a dividend, but this only made up 31% of its overall earnings. While the business may be attempting to set a balanced dividend policy, a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Over the next year, EPS is forecast to expand by 0.4%. If the dividend continues on this path, the payout ratio could be 32% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2012, the dividend has gone from €2.10 to €3.50. This works out to be a compound annual growth rate (CAGR) of approximately 5.2% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Mayr-Melnhof Karton Could Grow Its Dividend

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Mayr-Melnhof Karton has seen EPS rising for the last five years, at 8.3% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Mayr-Melnhof Karton's prospects of growing its dividend payments in the future.

Our Thoughts On Mayr-Melnhof Karton's Dividend

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 Mayr-Melnhof Karton (1 is significant!) that you should be aware of before investing. Is Mayr-Melnhof Karton 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.