Microequities Asset Management Group (ASX:MAM) Is Reducing Its Dividend To A$0.02

Microequities Asset Management Group Limited (ASX:MAM) is reducing its dividend from last year's comparable payment to A$0.02 on the 2nd of September. The yield is still above the industry average at 10.0%.

Check out our latest analysis for Microequities Asset Management Group

Microequities Asset Management Group Doesn't Earn Enough To Cover Its Payments

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Prior to this announcement, Microequities Asset Management Group's dividend made up quite a large proportion of earnings but only 74% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS could expand by 8.6% if the company continues along the path it has been on recently. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 105% over the next year.

Microequities Asset Management Group's Dividend Has Lacked Consistency

Looking back, the company hasn't been paying the most consistent dividend, but with such a short dividend history it could be too early to draw solid conclusions. Since 2018, the dividend has gone from A$0.02 total annually to A$0.08. This means that it has been growing its distributions at 41% per annum over that time. Microequities Asset Management Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

We Could See Microequities Asset Management Group's Dividend Growing

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Microequities Asset Management Group has seen EPS rising for the last five years, at 8.6% per annum. EPS has been growing at a reasonable rate, although with most of the profits being paid out to shareholders, growth prospects could be more limited in the future.

We Really Like Microequities Asset Management Group's Dividend

Overall, we think that Microequities Asset Management Group could be a great option for a dividend investment, although we would have preferred if the dividend wasn't cut this year. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Microequities Asset Management Group that investors should take into consideration. Is Microequities Asset Management Group 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.