MaxiPARTS' (ASX:MXI) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of MaxiPARTS Limited (ASX:MXI) has announced that it will be increasing its dividend by 19% on the 20th of March to A$0.0305, up from last year's comparable payment of A$0.0257. Based on this payment, the dividend yield for the company will be 2.6%, which is fairly typical for the industry.

View our latest analysis for MaxiPARTS

MaxiPARTS' Future Dividend Projections Appear Well Covered By Earnings

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. Prior to this announcement, MaxiPARTS' dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 62.4%. If the dividend continues on this path, the payout ratio could be 24% 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 one cut in the last 10 years. Since 2015, the dividend has gone from A$0.225 total annually to A$0.0514. Dividend payments have fallen sharply, down 77% over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. We are encouraged to see that MaxiPARTS has grown earnings per share at 54% per year over the past five years. MaxiPARTS is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

MaxiPARTS Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for MaxiPARTS that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield 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.