Mattioli Woods (LON:MTW) Will Pay A Dividend Of £0.09

Mattioli Woods plc (LON:MTW) has announced that it will pay a dividend of £0.09 per share on the 22nd of March. This will take the annual payment to 4.6% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Mattioli Woods

Mattioli Woods' Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 140% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 51%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.

EPS is set to grow by 104.5% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 77% - on the higher side, but we wouldn't necessarily say this is unsustainable.

Mattioli Woods Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was £0.07 in 2014, and the most recent fiscal year payment was £0.27. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Dividend Growth May Be Hard To Come By

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, things aren't all that rosy. Mattioli Woods has seen earnings per share falling at 9.1% per year over the last five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. 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.

Our Thoughts On Mattioli Woods' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Mattioli Woods' payments are rock solid. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Mattioli Woods that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.