Miquel y Costas & Miquel's (BME:MCM) Shareholders Will Receive A Bigger Dividend Than Last Year

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 13th of July to €0.0972. This makes the dividend yield about the same as the industry average at 4.1%.

Check out our latest analysis for Miquel y Costas & Miquel

Miquel y Costas & Miquel's Earnings Easily Cover The Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, Miquel y Costas & Miquel was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Unless the company can turn things around, EPS could fall by 0.6% over the next year. Assuming the dividend continues along recent trends, we believe the payout ratio could be 48%, which we are pretty comfortable with and we think is feasible on an earnings basis.

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 dividend has gone from an annual total of €0.103 in 2013 to the most recent total annual payment of €0.467. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend's Growth Prospects Are Limited

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, Miquel y Costas & Miquel's EPS was effectively flat over the past five years, which could stop the company from paying more every year.

The Dividend Could Prove To Be Unreliable

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Miquel y Costas & Miquel is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 2 warning signs for Miquel y Costas & Miquel that investors should know about before committing capital to this stock. Is Miquel y Costas & Miquel 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.