Mortgage Advice Bureau (Holdings) (LON:MAB1) Is Due To Pay A Dividend Of £0.147

The board of Mortgage Advice Bureau (Holdings) plc (LON:MAB1) has announced that it will pay a dividend on the 31st of May, with investors receiving £0.147 per share. This payment means the dividend yield will be 4.0%, which is below the average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Mortgage Advice Bureau (Holdings)'s stock price has increased by 32% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Mortgage Advice Bureau (Holdings)

Mortgage Advice Bureau (Holdings)'s Earnings Easily Cover The Distributions

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. Before making this announcement, the company's dividend was higher than its profits, and made up 78% of cash flows. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

The next year is set to see EPS grow by 95.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 73%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Mortgage Advice Bureau (Holdings)'s Dividend Has Lacked Consistency

It's comforting to see that Mortgage Advice Bureau (Holdings) has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2015, the annual payment back then was £0.02, compared to the most recent full-year payment of £0.281. This means that it has been growing its distributions at 39% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

Dividend Growth May Be Hard To Achieve

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. Mortgage Advice Bureau (Holdings) has seen earnings per share falling at 2.0% per year over the last five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

The Dividend Could Prove To Be Unreliable

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Mortgage Advice Bureau (Holdings)'s payments, as there could be some issues with sustaining them into the future. The track record isn't great, and the payments are a bit high to be considered sustainable. This company is not in the top tier of income providing stocks.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 4 warning signs for Mortgage Advice Bureau (Holdings) that you should be aware of before investing. Is Mortgage Advice Bureau (Holdings) 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.