Mullen Group (TSE:MTL) Has Affirmed Its Dividend Of CA$0.07

The board of Mullen Group Ltd. (TSE:MTL) has announced that it will pay a dividend of CA$0.07 per share on the 15th of January. This means the annual payment is 5.2% of the current stock price, which is above the average for the industry.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Mullen Group's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Mullen Group's dividend made up quite a large proportion of earnings but only 30% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Over the next year, EPS is forecast to expand by 44.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 52%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Check out our latest analysis for Mullen Group

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was CA$1.20 in 2015, and the most recent fiscal year payment was CA$0.84. This works out to be a decline of approximately 3.5% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

Dividend Growth Could Be Constrained

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. Mullen Group has seen EPS rising for the last five years, at 12% per annum. The payout ratio is very much on the higher end, which could mean that the growth rate will slow down in the future, and that could flow through to the dividend as well.

Our Thoughts On Mullen Group's Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 2 warning signs for Mullen Group that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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