Stock Analysis

Martinrea International (TSE:MRE) Is Due To Pay A Dividend Of CA$0.05

TSX:MRE
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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. This means the annual payment will be 1.6% of the current stock price, which is lower than the industry average.

Check out our latest analysis for Martinrea International

Martinrea International's Dividend Is Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, Martinrea International was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 31.0%. Assuming the dividend continues along recent trends, we think the payout ratio could be 8.6% by next year, which is in a pretty sustainable range.

historic-dividend
TSX:MRE Historic Dividend May 12th 2023

Martinrea International Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2013, the annual payment back then was CA$0.12, compared to the most recent full-year payment of CA$0.20. This works out to be a compound annual growth rate (CAGR) of approximately 5.2% a year over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Unfortunately, Martinrea International's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

In Summary

Overall, a consistent dividend is a good thing, and we think that Martinrea International has the ability to continue this into the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Martinrea International that investors should take into consideration. 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.