Mountview Estates (LON:MTVW) Is Increasing Its Dividend To £2.75

The board of Mountview Estates P.L.C. (LON:MTVW) has announced that it will be paying its dividend of £2.75 on the 19th of August, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 5.7%, providing a nice boost to shareholder returns.

See our latest analysis for Mountview Estates

Mountview Estates' 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, Mountview Estates was paying out quite a large proportion of both earnings and cash flow, with the dividend being 221% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

EPS is set to grow by 0.3% over the next year if recent trends continue. If the dividend continues along recent trends, we estimate the payout ratio could reach 78%, which is on the higher side, but certainly still feasible.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the dividend has gone from £1.75 total annually to £5.50. This means that it has been growing its distributions at 12% 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.

Mountview Estates May Find It Hard To Grow The Dividend

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. Mountview Estates hasn't seen much change in its earnings per share over the last five years. There are exceptions, but limited earnings growth and a high payout ratio can signal that a company has reached maturity. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

Our Thoughts On Mountview Estates' Dividend

In summary, while it's always good to see the dividend being raised, we don't think Mountview Estates' payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 2 warning signs for Mountview Estates (1 is a bit concerning!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.

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