CMC Markets' (LON:CMCX) Dividend Will Be £0.031

CMC Markets Plc (LON:CMCX) has announced that it will pay a dividend of £0.031 per share on the 9th of January. The payment will take the dividend yield to 3.1%, which is in line with the average for the industry.

View our latest analysis for CMC Markets

CMC Markets' Projected Earnings Seem Likely To Cover Future Distributions

Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, CMC Markets was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

EPS is set to fall by 8.4% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 41%, which we are pretty comfortable with and we think is feasible on an earnings basis.

CMC Markets' Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of £0.107 in 2016 to the most recent total annual payment of £0.083. This works out to be a decline of approximately 3.1% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

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. CMC Markets has impressed us by growing EPS at 28% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like CMC Markets' Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, CMC Markets has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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