Stock Analysis

Melexis' (EBR:MELE) Dividend Will Be €0.91

ENXTBR:MELE
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Melexis NV (EBR:MELE) will pay a dividend of €0.91 on the 19th of October. Based on this payment, the dividend yield on the company's stock will be 4.6%, which is an attractive boost to shareholder returns.

See our latest analysis for Melexis

Melexis' Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Based on the last payment, Melexis' earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, earnings per share is forecast to rise by 29.9% over the next year. If the dividend continues on this path, the payout ratio could be 42% by next year, which we think can be pretty sustainable going forward.

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ENXTBR:MELE Historic Dividend August 5th 2023

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of €0.65 in 2013 to the most recent total annual payment of €4.40. This implies that the company grew its distributions at a yearly rate of about 21% over that duration. Melexis 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.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Melexis has seen EPS rising for the last five years, at 13% per annum. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

Our Thoughts On Melexis' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

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. Case in point: We've spotted 2 warning signs for Melexis (of which 1 is a bit unpleasant!) you should know about. Looking for more high-yielding dividend ideas? Try our collection 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.