Mountview Estates P.L.C.'s (LON:MTVW) dividend will be increasing to UK£2.25 on 16th of August. This will take the annual payment to 3.4% of the stock price, which is above what most companies in the industry pay.
Mountview Estates' Earnings Easily Cover the Distributions
A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Mountview Estates' dividend was comfortably covered by both cash flow and earnings. This means that a large portion of its earnings are being retained to grow the business.
Looking forward, EPS could fall by 4.4% if the company can't turn things around from the last few years. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 60%, which is definitely feasible to continue.
Mountview Estates Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The first annual payment during the last 10 years was UK£1.65 in 2011, and the most recent fiscal year payment was UK£4.50. This means that it has been growing its distributions at 11% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
The Dividend's Growth Prospects Are Limited
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. It's not great to see that Mountview Estates' earnings per share has fallen at approximately 4.4% per year over the past five years. Declining earnings will inevitably lead to the company paying a lower dividend in line with lower profits.
Our Thoughts On Mountview Estates' Dividend
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Mountview Estates that you should be aware of before investing. We have also put together a list of global stocks with a solid dividend.
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