Mortgage Advice Bureau (Holdings) (LON:MAB1) Is Paying Out Less In Dividends Than Last Year

Mortgage Advice Bureau (Holdings) plc's (LON:MAB1) dividend is being reduced to UK£0.15 on the 30th of May. This means that the dividend yield is 2.4%, which is a bit low when comparing to other companies in the industry.

Check out our latest analysis for Mortgage Advice Bureau (Holdings)

Mortgage Advice Bureau (Holdings)'s Earnings Easily Cover the Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. The last payment made up 80% of earnings, but cash flows were much higher. This leaves plenty of cash for reinvestment into the business.

Earnings per share is forecast to rise by 22.4% over the next year. If recent patterns in the dividend continues, the payout ratio in 12 months could be 78% which is a bit high but can definitely be sustainable.

Mortgage Advice Bureau (Holdings)'s Dividend Has Lacked Consistency

Mortgage Advice Bureau (Holdings) has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2015, the dividend has gone from UK£0.02 to UK£0.28. This works out to be a compound annual growth rate (CAGR) of approximately 46% a year over that time. Mortgage Advice Bureau (Holdings) 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.

We Could See Mortgage Advice Bureau (Holdings)'s Dividend Growing

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Mortgage Advice Bureau (Holdings) has seen EPS rising for the last five years, at 5.1% per annum. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

Our Thoughts On Mortgage Advice Bureau (Holdings)'s Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. Overall, we don't think this company has the makings of a good income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 2 warning signs for Mortgage Advice Bureau (Holdings) that investors should take into consideration. 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.