Mears Group's (LON:MER) Dividend Will Be £0.056

Mears Group plc's (LON:MER) investors are due to receive a payment of £0.056 per share on 2nd of October. This takes the dividend yield to 4.1%, which shareholders will be pleased with.

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Mears Group's Projected Earnings Seem Likely To Cover Future Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Mears Group's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 31.1% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 45%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

Check out our latest analysis for Mears Group

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was £0.10 in 2015, and the most recent fiscal year payment was £0.16. This implies that the company grew its distributions at a yearly rate of about 4.8% over that duration. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Mears Group has impressed us by growing EPS at 51% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

Mears Group Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Mears Group is a strong income stock thanks to its track record and growing earnings. The earnings easily cover the company's distributions, and the company is generating plenty of cash. 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 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Mears Group (of which 1 makes us a bit uncomfortable!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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