Stock Analysis

Mirbud (WSE:MRB) Is Increasing Its Dividend To zł0.06

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The board of Mirbud S.A. (WSE:MRB) has announced that it will be increasing its dividend on the 16th of August to zł0.06. Despite this raise, the dividend yield of 1.2% is only a modest boost to shareholder returns.

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Mirbud's 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. However, prior to this announcement, Mirbud's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 42.7% if recent trends continue. If the dividend continues on this path, the payout ratio could be 4.9% by next year, which we think can be pretty sustainable going forward.

WSE:MRB Historic Dividend June 26th 2021

Mirbud's Dividend Has Lacked Consistency

It's comforting to see that Mirbud has been paying a dividend for a number of years now, however it has been cut at least once in that time. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2012, the first annual payment was zł0.10, compared to the most recent full-year payment of zł0.06. This works out to be a decline of approximately 5.5% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, and a poor history of shrinking dividends, it's even more important to see if EPS is growing. Mirbud has seen EPS rising for the last five years, at 43% per annum. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like Mirbud's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Mirbud stock. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.

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