Mayfield Group Holdings' (ASX:MYG) Upcoming Dividend Will Be Larger Than Last Year's

The board of Mayfield Group Holdings Limited (ASX:MYG) has announced that it will be increasing its dividend by 100% on the 22nd of August to A$0.02, up from last year's comparable payment of A$0.01. This will take the annual payment to 2.4% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Mayfield Group Holdings

Mayfield Group Holdings Is Paying Out More Than It Is Earning

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Mayfield Group Holdings was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

If the company can't turn things around, EPS could fall by 80.8% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 395%, which could put the dividend under pressure if earnings don't start to improve.

Mayfield Group Holdings Doesn't Have A Long Payment History

It's not possible for us to make a backward looking judgement just based on a short payment history. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately things aren't as good as they seem. Mayfield Group Holdings' EPS has fallen by approximately 81% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Our Thoughts On Mayfield Group Holdings' Dividend

Overall, we always like to see the dividend being raised, but we don't think Mayfield Group Holdings will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We don't think Mayfield Group Holdings is a great stock to add to your portfolio if income is your focus.

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. Taking the debate a bit further, we've identified 2 warning signs for Mayfield Group Holdings that investors need to be conscious of moving forward. Is Mayfield Group Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com