MaltaPost p.l.c.'s (MTSE:MTP) investors are due to receive a payment of €0.037 per share on 20th of March. Based on this payment, the dividend yield on the company's stock will be 6.3%, which is an attractive boost to shareholder returns.
Check out our latest analysis for MaltaPost
Estimates Indicate MaltaPost's Could Struggle to Maintain Dividend Payments In The Future
If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, the company was paying out 125% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.
Earnings per share could rise by 7.6% over the next year if things go the same way as they have for the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 114%, which probably can't continue without starting to put some pressure on the balance sheet.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from €0.02 total annually to €0.03. This means that it has been growing its distributions at 4.1% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.
Dividend Growth May Be Hard To Achieve
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. We are encouraged to see that MaltaPost has grown earnings per share at 7.6% per year over the past five years. While EPS is growing at a decent rate, but future growth could be limited by the amount of earnings being paid out to shareholders.
The Dividend Could Prove To Be Unreliable
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about MaltaPost's payments, as there could be some issues with sustaining them into the future. The payments are bit high to be considered sustainable, and the track record isn't the best. We would be a touch cautious of relying on this stock primarily for the dividend income.
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. Just as an example, we've come across 3 warning signs for MaltaPost you should be aware of, and 2 of them can't be ignored. If you are a dividend investor, you might also want to look at our curated list of high yield 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.
About MTSE:MTP
MaltaPost
Provides postal and financial services in Malta and internationally.
Flawless balance sheet with solid track record.
