Mayr-Melnhof Karton's (VIE:MMK) Upcoming Dividend Will Be Larger Than Last Year's

Mayr-Melnhof Karton AG (VIE:MMK) will increase its dividend on the 11th of May to €3.50. This takes the annual payment to 2.2% of the current stock price, which is about average for the industry.

View our latest analysis for Mayr-Melnhof Karton

Mayr-Melnhof Karton's Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Based on the last payment, Mayr-Melnhof Karton was paying only paying out a fraction of earnings, but the payment was a massive 327% of cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share is forecast to rise by 14.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 33%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. The first annual payment during the last 10 years was €2.10 in 2012, and the most recent fiscal year payment was €3.50. This implies that the company grew its distributions at a yearly rate of about 5.2% over that duration. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Mayr-Melnhof Karton might have put its house in order since then, but we remain cautious.

Mayr-Melnhof Karton May Find It Hard To Grow The 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. Earnings have grown at around 4.3% a year for the past five years, which isn't massive but still better than seeing them shrink. If Mayr-Melnhof Karton is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Mayr-Melnhof Karton will make a great income stock. While Mayr-Melnhof Karton is earning enough to cover the payments, the cash flows are lacking. We don't think Mayr-Melnhof Karton is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 3 warning signs for Mayr-Melnhof Karton 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.