Masterflex (ETR:MZX) Is Increasing Its Dividend To €0.20

Masterflex SE (ETR:MZX) will increase its dividend on the 13th of June to €0.20, which is 67% higher than last year's payment from the same period of €0.12. Despite this raise, the dividend yield of 1.3% is only a modest boost to shareholder returns.

See our latest analysis for Masterflex

Masterflex's Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Masterflex's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 36.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 23%, which is in the range that makes us comfortable with the sustainability of the dividend.

Masterflex Is Still Building Its Track Record

It is great to see that Masterflex has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. The dividend has gone from an annual total of €0.05 in 2017 to the most recent total annual payment of €0.12. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Masterflex has seen EPS rising for the last five years, at 12% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

We Really Like Masterflex's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Are management backing themselves to deliver performance? Check their shareholdings in Masterflex in our latest insider ownership analysis. 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.