Martinrea International (TSE:MRE) Has Affirmed Its Dividend Of CA$0.05

The board of Martinrea International Inc. (TSE:MRE) has announced that it will pay a dividend on the 15th of July, with investors receiving CA$0.05 per share. The dividend yield is 2.3% based on this payment, which is a little bit low compared to the other companies in the industry.

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Martinrea International's Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate Martinrea International's Could Struggle to Maintain Dividend Payments In The Future

Martinrea International's Future Dividends May Potentially Be At Risk

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. While Martinrea International is not profitable, it is paying out less than 75% of its free cash flow, which means that there is plenty left over for reinvestment into the business. This gives us some comfort about the level of the dividend payments.

Over the next year, EPS is forecast to expand by 119.1%. If the dividend continues on its recent course, the payout ratio in 12 months could be 130%, which is a bit high and could start applying pressure to the balance sheet.

See our latest analysis for Martinrea International

Martinrea International Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of CA$0.12 in 2015 to the most recent total annual payment of CA$0.20. This implies that the company grew its distributions at a yearly rate of about 5.2% over that duration. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Company Could Face Some Challenges Growing The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Martinrea International has seen EPS rising for the last five years, at 12% per annum. It's not great that the company is not turning a profit, but the decent growth in recent years is certainly a positive sign. As long as the company becomes profitable soon, it is on a trajectory that could see it being a solid dividend payer.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Martinrea International's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Martinrea International that investors need to be conscious of moving forward. 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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