Marsden Maritime Holdings (NZSE:MMH) Will Pay A Smaller Dividend Than Last Year

Marsden Maritime Holdings Limited (NZSE:MMH) is reducing its dividend from last year's comparable payment to NZ$0.0882 on the 29th of September. The yield is still above the industry average at 3.3%.

Check out our latest analysis for Marsden Maritime Holdings

Marsden Maritime Holdings' 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, Marsden Maritime Holdings was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. However, with more than 75% of free cash flow being paid out to shareholders, future growth could potentially be constrained.

Looking forward, could fall by 3.3% if the company can't turn things around from the last few years. If recent patterns in the dividend continue, we could see the payout ratio reaching 89% in the next 12 months which is on the higher end of the range we would say is sustainable.

Marsden Maritime Holdings Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of NZ$0.085 in 2013 to the most recent total annual payment of NZ$0.16. This works out to be a compound annual growth rate (CAGR) of approximately 6.5% a year over that time. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately things aren't as good as they seem. It's not great to see that Marsden Maritime Holdings' earnings per share has fallen at approximately 3.3% per year over the past five years. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Our Thoughts On Marsden Maritime Holdings' Dividend

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The company hasn't been paying a very consistent dividend over time, despite only paying out a small portion of earnings. We don't think Marsden Maritime Holdings is a great stock to add to your portfolio if income is your focus.

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. Taking the debate a bit further, we've identified 2 warning signs for Marsden Maritime Holdings that investors need to be conscious of moving forward. Is Marsden Maritime Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.