Mirbud S.A. (WSE:MRB) will increase its dividend on the 21st of June to zł0.20, which is 150% higher than last year. This makes the dividend yield about the same as the industry average at 5.8%.
Mirbud's Earnings Easily Cover the Distributions
We aren't too impressed by dividend yields unless they can be sustained over time. 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 43.3% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 26% by next year, which is in a pretty sustainable range.
The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2012, the first annual payment was zł0.10, compared to the most recent full-year payment of zł0.08. The dividend has shrunk at around 2.2% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Mirbud has impressed us by growing EPS at 43% 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.
Mirbud Looks Like A Great Dividend Stock
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. All of these factors considered, we think this has solid potential as a dividend stock.
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. For instance, we've picked out 2 warning signs for Mirbud that investors should take into consideration. Is Mirbud not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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