Martinrea International (TSE:MRE) Has Announced A Dividend Of CA$0.05

The board of Martinrea International Inc. (TSE:MRE) has announced that it will pay a dividend of CA$0.05 per share on the 15th of October. This payment means the dividend yield will be 2.1%, which is below the average for the industry.

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Martinrea International's Future Dividend Projections Seem Positive

Even a low dividend yield can be attractive if it is sustained for years on end. Martinrea International is not generating a profit, but its free cash flows easily cover the dividend, leaving plenty for reinvestment in the business. We generally think that cash flow is more important than accounting measures of profit, so we are fairly comfortable with the dividend at this level.

EPS is set to grow by 131.2% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 78% which is a bit high but can definitely be sustainable.

View 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. Since 2015, the dividend has gone from CA$0.12 total annually to CA$0.20. This works out to be a compound annual growth rate (CAGR) of approximately 5.2% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Martinrea International Could Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Martinrea International has grown earnings per share at 8.9% per year over the past five years. It's not great that the company is not turning a profit, but the decent growth in recent years is certainly a positive sign. Assuming the company can post positive net income numbers soon, it could has the potential to be a decent dividend payer.

Our Thoughts On Martinrea International's Dividend

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 has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. Overall, we don't think this company has the makings of a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 2 warning signs for Martinrea International that investors should take into consideration. Is Martinrea International not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.