ME Group International (LON:MEGP) Has Announced A Dividend Of £0.03

ME Group International plc (LON:MEGP) has announced that it will pay a dividend of £0.03 per share on the 12th of May. This makes the dividend yield 4.7%, which will augment investor returns quite nicely.

View our latest analysis for ME Group International

ME Group International's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last dividend was quite easily covered by ME Group International's earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Earnings per share is forecast to rise by 37.4% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 81% - on the higher side, but we wouldn't necessarily say this is unsustainable.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the dividend has gone from £0.025 total annually to £0.06. This implies that the company grew its distributions at a yearly rate of about 9.1% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.

ME Group International May Find It Hard To Grow The Dividend

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Unfortunately, ME Group International's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Growth of 0.8% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On ME Group International's Dividend

Overall, a consistent dividend is a good thing, and we think that ME Group International has the ability to continue this into the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for ME Group International that investors need to be conscious of moving forward. Is ME Group International not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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