Mycronic (STO:MYCR) Is Increasing Its Dividend To SEK3.50

Mycronic AB (publ) (STO:MYCR) has announced that it will be increasing its dividend from last year's comparable payment on the 16th of May to SEK3.50. This takes the dividend yield to 1.6%, which shareholders will be pleased with.

See our latest analysis for Mycronic

Mycronic's Payment Has Solid Earnings Coverage

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Mycronic's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS could expand by 3.6% if recent trends continue. If the dividend continues on this path, the payout ratio could be 48% by next year, which we think can be pretty sustainable going forward.

Mycronic's Dividend Has Lacked Consistency

Looking back, Mycronic's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 8 years was SEK4.00 in 2015, and the most recent fiscal year payment was SEK3.50. This works out to be a decline of approximately 1.7% per year over that time. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Earnings per share has been crawling upwards at 3.6% per year. The company has been growing at a pretty soft 3.6% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

Our Thoughts On Mycronic's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. For instance, we've picked out 1 warning sign for Mycronic that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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