Macfarlane Group (LON:MACF) Has Announced That It Will Be Increasing Its Dividend To £0.0265

Macfarlane Group PLC's (LON:MACF) dividend will be increasing from last year's payment of the same period to £0.0265 on 30th of May. The payment will take the dividend yield to 2.5%, which is in line with the average for the industry.

View our latest analysis for Macfarlane Group

Macfarlane Group's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. However, Macfarlane Group's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 17.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 35%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from £0.016 total annually to £0.0359. This works out to be a compound annual growth rate (CAGR) of approximately 8.4% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Macfarlane Group has grown earnings per share at 11% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Macfarlane Group's Dividend

Overall, a dividend increase is always good, and we think that Macfarlane Group is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. As an example, we've identified 2 warning signs for Macfarlane Group that you should be aware of before investing. Is Macfarlane Group 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.