Money3's (ASX:MNY) Dividend Will Be Increased To AU$0.07

Money3 Corporation Limited (ASX:MNY) has announced that it will be increasing its dividend on the 14th of October to AU$0.07. This takes the dividend yield from 2.9% to 2.9%, which shareholders will be pleased with.

View our latest analysis for Money3

Money3's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Money3 is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, earnings per share is forecast to rise by 13.8% over the next year. If the dividend continues on this path, the payout ratio could be 49% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The first annual payment during the last 10 years was AU$0.041 in 2011, and the most recent fiscal year payment was AU$0.10. This implies that the company grew its distributions at a yearly rate of about 9.3% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Has Growth Potential

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Money3 has seen EPS rising for the last five years, at 6.9% per annum. Money3 definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We'd also point out that Money3 has issued stock equal to 13% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Our Thoughts On Money3's Dividend

Overall, we always like to see the dividend being raised, but we don't think Money3 will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Money3 (of which 1 shouldn't be ignored!) you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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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.
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