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 July. Including this payment, the dividend yield on the stock will be 1.7%, which is a modest boost for shareholders' returns.
View our latest analysis for Martinrea International
Martinrea International's Payment Has Solid Earnings Coverage
If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Martinrea International was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.
The next year is set to see EPS grow by 28.2%. 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.
Martinrea International Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of CA$0.12 in 2014 to the most recent total annual payment of CA$0.20. This means that it has been growing its distributions at 5.2% per annum 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.
Dividend Growth May Be Hard To Achieve
Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Martinrea International hasn't seen much change in its earnings per share over the last five years.
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. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign 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.
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About TSX:MRE
Martinrea International
Engages in the design, development, and manufacturing of engineered, value-added lightweight structures and propulsion systems worldwide.
Undervalued with excellent balance sheet and pays a dividend.
