Miquel y Costas & Miquel (BME:MCM) Is Increasing Its Dividend To €0.1042

Miquel y Costas & Miquel, S.A. (BME:MCM) has announced that it will be increasing its dividend from last year's comparable payment on the 18th of July to €0.1042. This takes the annual payment to 3.3% of the current stock price, which is about average for the industry.

View our latest analysis for Miquel y Costas & Miquel

Miquel y Costas & Miquel's Payment Has Solid Earnings Coverage

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. However, Miquel y Costas & Miquel's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, EPS could fall by 4.7% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 37%, which is definitely feasible to continue.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the annual payment back then was €0.109, compared to the most recent full-year payment of €0.437. This means that it has been growing its distributions at 15% per annum over that time. Miquel y Costas & Miquel has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Miquel y Costas & Miquel has seen earnings per share falling at 4.7% per year over the last three years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Miquel y Costas & Miquel's payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We don't think Miquel y Costas & Miquel is a great stock to add to your portfolio if income is your focus.

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. Case in point: We've spotted 2 warning signs for Miquel y Costas & Miquel (of which 1 is significant!) you should know about. 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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