Macfarlane Group (LON:MACF) Is Paying Out A Larger Dividend Than Last Year

Macfarlane Group PLC (LON:MACF) has announced that it will be increasing its periodic dividend on the 1st of June to £0.0252, which will be 8.2% higher than last year's comparable payment amount of £0.0233. This will take the dividend yield to an attractive 3.0%, providing a nice boost to shareholder returns.

View our latest analysis for Macfarlane Group

Macfarlane Group's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Macfarlane Group's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 6.6%. If the dividend continues on this path, the payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2013, the annual payment back then was £0.0155, compared to the most recent full-year payment of £0.0342. This means that it has been growing its distributions at 8.2% per annum over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

The Dividend Looks Likely To Grow

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. It's encouraging to see that Macfarlane Group has been growing its earnings per share at 14% a year over the past five years. 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 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. 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. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Macfarlane Group that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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