Stock Analysis

Martinrea International (TSE:MRE) Is Paying Out A Dividend Of CA$0.05

TSX:MRE
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Martinrea International Inc.'s (TSE:MRE) investors are due to receive a payment of CA$0.05 per share on 15th of January. This payment means the dividend yield will be 1.5%, which is below the average for the industry.

See our latest analysis for Martinrea International

Martinrea International's Dividend Is Well Covered By Earnings

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. 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.

Looking forward, earnings per share is forecast to rise by 126.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 3.8% by next year, which is in a pretty sustainable range.

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TSX:MRE Historic Dividend December 14th 2023

Martinrea International Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. 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. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Martinrea International May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, Martinrea International has only grown its earnings per share at 3.9% per annum over the past five years. While EPS growth is quite low, Martinrea International has the option to increase the payout ratio to return more cash to shareholders.

Martinrea International Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 1 warning sign 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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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.