M&G's (LON:MNG) Dividend Will Be Increased To £0.135

M&G plc (LON:MNG) has announced that it will be increasing its periodic dividend on the 9th of May to £0.135, which will be 2.3% higher than last year's comparable payment amount of £0.132. This takes the dividend yield to 9.2%, which shareholders will be pleased with.

M&G's Projections Indicate Future Payments May Be Unsustainable

Estimates Indicate M&G's Could Struggle to Maintain Dividend Payments In The Future

M&G's Future Dividends May Potentially Be At Risk

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The company is paying out a large amount of its cash flows, even though it isn't generating any profit. This is quite a strong warning sign that the dividend may not be sustainable.

Over the next year, EPS is forecast to expand by 196.0%. If the dividend continues on its recent course, the payout ratio in 12 months could be 143%, which is a bit high and could start applying pressure to the balance sheet.

Check out our latest analysis for M&G

M&G Is Still Building Its Track Record

M&G's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2020, the annual payment back then was £0.119, compared to the most recent full-year payment of £0.201. This means that it has been growing its distributions at 11% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

Dividend Growth Potential Is Shaky

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. M&G's earnings per share has shrunk at 45% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.

M&G's Dividend Doesn't Look Great

In summary, investors will like to be receiving a higher dividend, but we have some questions about whether it can be sustained over the long term. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 2 warning signs for M&G that you should be aware of before investing. Is M&G not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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