Morgan Sindall Group (LON:MGNS) Is Increasing Its Dividend To £0.78

Morgan Sindall Group plc's (LON:MGNS) dividend will be increasing from last year's payment of the same period to £0.78 on 16th of May. This makes the dividend yield 5.0%, which is above the industry average.

Check out our latest analysis for Morgan Sindall Group

Morgan Sindall Group's Dividend Is Well Covered By Earnings

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. 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.

The next year is set to see EPS grow by 3.5%. If the dividend continues on this path, the payout ratio could be 50% 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 2014, the annual payment back then was £0.27, compared to the most recent full-year payment of £1.14. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

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 Morgan Sindall Group has grown earnings per share 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.

We Really Like Morgan Sindall Group's Dividend

Overall, a dividend increase is always good, and we think that Morgan Sindall 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.

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. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.