Mitie Group plc (LON:MTO) has announced that it will pay a dividend of £0.013 per share on the 4th of February. This will take the dividend yield to an attractive 3.7%, providing a nice boost to shareholder returns.
View our latest analysis for Mitie Group
Mitie Group's Projected Earnings Seem Likely To Cover Future Distributions
A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Mitie Group's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Over the next year, EPS is forecast to expand by 25.8%. If the dividend continues on this path, the payout ratio could be 29% by next year, which we think can be pretty sustainable going forward.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was £0.11 in 2014, and the most recent fiscal year payment was £0.04. This works out to be a decline of approximately 9.6% per year over that time. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
The Dividend Has Growth Potential
Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. We are encouraged to see that Mitie Group has grown earnings per share at 7.1% per year over the past five years. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.
Our Thoughts On Mitie Group's Dividend
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
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. As an example, we've identified 2 warning signs for Mitie Group that you should be aware of before investing. Is Mitie 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.
About LSE:MTO
Mitie Group
Provides facilities management and professional services in the United Kingdom and internationally.
Very undervalued with solid track record.
