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

M.P. Evans Group PLC (LON:MPE) has announced that it will be increasing its dividend from last year's comparable payment on the 16th of June to $0.30. This makes the dividend yield 5.0%, which is above the industry average.

See our latest analysis for M.P. Evans Group

M.P. Evans Group's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, M.P. Evans Group's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 5.1% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 39%, 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 annual payment during the last 10 years was $0.128 in 2013, and the most recent fiscal year payment was $0.519. This means that it has been growing its distributions at 15% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. M.P. Evans Group has impressed us by growing EPS at 27% 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 M.P. Evans Group's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.

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. To that end, M.P. Evans Group has 2 warning signs (and 1 which is a bit concerning) we think you should know about. Is M.P. Evans Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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