Monash IVF Group (ASX:MVF) Will Pay A Dividend Of A$0.022

The board of Monash IVF Group Limited (ASX:MVF) has announced that it will pay a dividend of A$0.022 per share on the 11th of October. This means the annual payment is 3.7% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Monash IVF Group

Monash IVF Group's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. At the time of the last dividend payment, Monash IVF Group was paying out a very large proportion of what it was earning and 138% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

The next year is set to see EPS grow by 57.9%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 46% which brings it into quite a comfortable range.

Monash IVF Group's Dividend Has Lacked Consistency

It's comforting to see that Monash IVF Group has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of A$0.065 in 2015 to the most recent total annual payment of A$0.044. Doing the maths, this is a decline of about 4.8% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth May Be Hard To Come By

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. It's not great to see that Monash IVF Group's earnings per share has fallen at approximately 9.2% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Monash IVF Group's payments, as there could be some issues with sustaining them into the future. The payments are bit high to be considered sustainable, and the track record isn't the best. We don't think Monash IVF Group is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Monash IVF Group that you should be aware of before investing. 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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