Morgan Sindall Group (LON:MGNS) Is Due To Pay A Dividend Of £0.415

The board of Morgan Sindall Group plc (LON:MGNS) has announced that it will pay a dividend on the 24th of October, with investors receiving £0.415 per share. The payment will take the dividend yield to 4.1%, which is in line with the average for the industry.

See our latest analysis for Morgan Sindall Group

Morgan Sindall Group's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Based on the last payment, Morgan Sindall Group was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.

EPS is set to fall by 5.1% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 55%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2014, the annual payment back then was £0.27, compared to the most recent full-year payment of £1.2. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. Morgan Sindall Group 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.

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. Morgan Sindall Group has impressed us by growing EPS at 11% per year over the past five years. Earnings are on the uptrend, and it is only paying a small portion of those earnings to shareholders.

Morgan Sindall Group Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Morgan Sindall Group that you should be aware of before investing. 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.