Manolete Partners' (LON:MANO) Dividend Is Being Reduced To UK£0.01

Manolete Partners Plc (LON:MANO) is reducing its dividend to UK£0.01 on the 7th of October. This means that the annual payment is 1.0% of the current stock price, which is lower than what the rest of the industry is paying.

Check out our latest analysis for Manolete Partners

Manolete Partners' Payment Has Solid Earnings Coverage

Even a low dividend yield can be attractive if it is sustained for years on end. Manolete Partners is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

Looking forward, EPS could fall by 60.6% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be , which is definitely feasible to continue.

Manolete Partners' Dividend Has Lacked Consistency

Even in its short history, we have seen the dividend cut. Since 2019, the dividend has gone from UK£0.022 to UK£0.022. This works out to be a decline of approximately 1.6% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Potential Is Shaky

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. Over the past five years, it looks as though Manolete Partners' EPS has declined at around 61% a year. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.

The Dividend Could Prove To Be Unreliable

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

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 3 warning signs for Manolete Partners (of which 1 doesn't sit too well with us!) you should know about. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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