Mytilineos (ATH:MYTIL) Will Pay A Larger Dividend Than Last Year At €0.42

Mytilineos S.A.'s (ATH:MYTIL) dividend will be increasing to €0.42 on 1st of July. Even though the dividend went up, the yield is still quite low at only 2.5%.

See our latest analysis for Mytilineos

Mytilineos' Payment Has Solid Earnings Coverage

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, Mytilineos' earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 65.2%. If the dividend continues along recent trends, we estimate the payout ratio will be 21%, which is in the range that makes us comfortable with the sustainability of the dividend.

Mytilineos Doesn't Have A Long Payment History

The dividend hasn't seen any major cuts in the past, but the company has only been paying a dividend for 4 years, which isn't that long in the grand scheme of things. The dividend has gone from €0.32 in 2018 to the most recent annual payment of €0.42. This implies that the company grew its distributions at a yearly rate of about 7.0% over that duration. Mytilineos has a nice track record of dividend growth but we would wait until we see a longer track record before getting too confident.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Mytilineos has grown earnings per share at 31% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Mytilineos will make a great income stock. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 2 warning signs for Mytilineos (of which 1 shouldn't be ignored!) you should know about. Is Mytilineos not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.