Macfarlane Group's (LON:MACF) Dividend Will Be Increased To £0.0252

Macfarlane Group PLC's (LON:MACF) periodic dividend will be increasing on the 1st of June to £0.0252, with investors receiving 8.2% more than last year's £0.0233. This will take the annual payment to 3.3% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Macfarlane Group

Macfarlane Group's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Macfarlane Group's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 4.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 36% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of £0.0155 in 2013 to the most recent total annual payment of £0.0342. This works out to be a compound annual growth rate (CAGR) of approximately 8.2% a year 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. Macfarlane Group has impressed us by growing EPS at 14% per year over the past five years. Macfarlane Group definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

We Really Like Macfarlane Group's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. 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.

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. 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.