ManpowerGroup's (NYSE:MAN) Dividend Is Being Reduced To $0.72

ManpowerGroup Inc.'s (NYSE:MAN) dividend is being reduced from last year's payment covering the same period to $0.72 on the 16th of June. The dividend yield of 3.3% is still a nice boost to shareholder returns, despite the cut.

Our free stock report includes 2 warning signs investors should be aware of before investing in ManpowerGroup. Read for free now.

ManpowerGroup's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before this announcement, ManpowerGroup was paying out 132% of what it was earning, and not generating any free cash flows either. Paying out such a large dividend compared to earnings while also not generating any free cash flow would definitely be difficult to keep up.

The next year is set to see EPS grow by 116.5%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 47% which brings it into quite a comfortable range.

Check out our latest analysis for ManpowerGroup

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was $0.98 in 2015, and the most recent fiscal year payment was $1.44. This works out to be a compound annual growth rate (CAGR) of approximately 3.9% a year 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 Potential Is Shaky

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. ManpowerGroup's earnings per share has shrunk at 19% a year over the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

We're Not Big Fans Of ManpowerGroup's Dividend

To sum up, we don't like when dividends are cut, but in this case the dividend may have been too high to begin with. The company seems to be stretching itself a bit to make such big payments, but it doesn't appear they can be consistent over time. Overall, the dividend is not reliable enough to make this a good income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 2 warning signs for ManpowerGroup (of which 1 is a bit unpleasant!) you should know about. Is ManpowerGroup not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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