MAAS Group Holdings' (ASX:MGH) Dividend Will Be Reduced To A$0.03

MAAS Group Holdings Limited (ASX:MGH) has announced that on 29th of September, it will be paying a dividend ofA$0.03, which a reduction from last year's comparable dividend. This payment takes the dividend yield to 1.8%, which only provides a modest boost to overall returns.

View our latest analysis for MAAS Group Holdings

MAAS Group Holdings' Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. MAAS Group Holdings is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Over the next year, EPS is forecast to expand by 98.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 15%, which is in the range that makes us comfortable with the sustainability of the dividend.

MAAS Group Holdings' Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. The annual payment during the last 2 years was A$0.04 in 2021, and the most recent fiscal year payment was A$0.06. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

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. MAAS Group Holdings has impressed us by growing EPS at 26% per year over the past three years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Our Thoughts On MAAS Group Holdings' Dividend

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While MAAS Group Holdings is earning enough to cover the payments, the cash flows are lacking. 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. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 4 warning signs for MAAS Group Holdings (1 is potentially serious!) that you should be aware of before investing. Is MAAS Group Holdings 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.