Stock Analysis

Martinrea International's (TSE:MRE) Dividend Will Be CA$0.05

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Martinrea International Inc. (TSE:MRE) will pay a dividend of CA$0.05 on the 15th of October. This means the annual payment will be 1.6% of the current stock price, which is lower than the industry average.

View our latest analysis for Martinrea International

Martinrea International's Dividend Is Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, Martinrea International's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 27.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 7.6% by next year, which is in a pretty sustainable range.

TSX:MRE Historic Dividend August 22nd 2023

Martinrea International Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of CA$0.12 in 2013 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.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Martinrea International hasn't seen much change in its earnings per share over the last five years. If Martinrea International is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

We Really Like Martinrea International's Dividend

Overall, we like to see the dividend staying consistent, and we think Martinrea International might even raise payments in the future. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Martinrea International that investors should know about before committing capital to this stock. 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.