M.P. Evans Group's (LON:MPE) Upcoming Dividend Will Be Larger Than Last Year's

The board of M.P. Evans Group PLC (LON:MPE) has announced that it will be increasing its dividend on the 17th of June to UK£0.25. This will take the annual payment from 3.5% to 4.0% of the stock price, which is above what most companies in the industry pay.

View our latest analysis for M.P. Evans Group

M.P. Evans Group's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, M.P. Evans Group was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to fall by 18.5%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 36%, which is comfortable for the company to continue in the future.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The first annual payment during the last 10 years was US$0.11 in 2012, and the most recent fiscal year payment was US$0.46. This means that it has been growing its distributions at 15% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

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. M.P. Evans Group has impressed us by growing EPS at 48% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like M.P. Evans Group's 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. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 2 warning signs for M.P. Evans Group (of which 1 doesn't sit too well with us!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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