Magellan Aerospace (TSE:MAL) Has Announced A Dividend Of CA$0.025

Magellan Aerospace Corporation (TSE:MAL) will pay a dividend of CA$0.025 on the 29th of March. The dividend yield is 1.2% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for Magellan Aerospace

Magellan Aerospace'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. Even though Magellan Aerospace is not generating a profit, it is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.

Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 10%, which makes us pretty comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was CA$0.12, compared to the most recent full-year payment of CA$0.10. This works out to be a decline of approximately 1.8% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Magellan Aerospace's earnings per share has shrunk at 69% a year over the past five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

We're Not Big Fans Of Magellan Aerospace's Dividend

Overall, while some might be pleased that the dividend wasn't cut, we think this may help Magellan Aerospace make more consistent payments in the future. The company isn't making enough to be paying as much as it is, and the other factors don't look particularly promising either. Overall, this doesn't get us very excited from an income standpoint.

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. See if management have their own wealth at stake, by checking insider shareholdings in Magellan Aerospace stock. 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.