Macquarie Group (ASX:MQG) Has Announced That It Will Be Increasing Its Dividend To A$3.90

Macquarie Group Limited's (ASX:MQG) dividend will be increasing from last year's payment of the same period to A$3.90 on 2nd of July. Based on this payment, the dividend yield for the company will be 3.1%, which is fairly typical for the industry.

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Macquarie Group's Earnings Will Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much.

Having distributed dividends for at least 10 years, Macquarie Group has a long history of paying out a part of its earnings to shareholders. Based on Macquarie Group's last earnings report, the payout ratio is at a decent 66%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to expand by 31.5%. Analysts forecast the future payout ratio could be 67% over the same time horizon, which is a number we think the company can maintain.

Check out our latest analysis for Macquarie Group

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was A$2.60 in 2015, and the most recent fiscal year payment was A$6.50. This means that it has been growing its distributions at 9.6% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings per share has been crawling upwards at 4.5% per year. The company has been growing at a pretty soft 4.5% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

In Summary

Overall, this is a reasonable dividend, and it being raised is an added bonus. The payout ratio looks good, but unfortunately the company's dividend track record isn't stellar. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. As an example, we've identified 1 warning sign for Macquarie Group that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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