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

Martinrea International Inc.'s (TSE:MRE) investors are due to receive a payment of CA$0.05 per share on 15th of July. This payment means that the dividend yield will be 2.4%, which is around the industry average.

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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

We aren't too impressed by dividend yields unless they can be sustained over time. 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%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 133%, which probably can't continue without putting some pressure on the balance sheet.

View our latest analysis for Martinrea International

Martinrea International Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2015, the dividend has gone from CA$0.12 total annually to CA$0.20. This implies that the company grew its distributions at a yearly rate of about 5.2% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Company Could Face Some Challenges Growing The Dividend

Investors could be attracted to the stock based on the quality of its payment history. Martinrea International has impressed us by growing EPS at 12% per year over the past five years. Unprofitable companies aren't normally our pick for a dividend stock, but we like the growth that we have been seeing. All is not lost, but the future of the dividend definitely rests upon the company's ability to become profitable soon.

Our Thoughts On Martinrea International's Dividend

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. 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. For example, we've picked out 2 warning signs for Martinrea International that investors should know about before committing capital to this stock. 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.