Marine Products (NYSE:MPX) Will Pay A Dividend Of $0.14

Marine Products Corporation (NYSE:MPX) will pay a dividend of $0.14 on the 10th of December. The dividend yield will be 6.0% based on this payment which is still above the industry average.

See our latest analysis for Marine Products

Marine Products' Projections Indicate Future Payments May Be Unsustainable

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 102% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 54%. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

Looking forward, earnings per share is forecast to fall by 1.1% over the next year. If the dividend continues along the path it has been on recently, the company could be paying out more than double what it is earning, which is definitely a bit high to be sustainable going forward.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2014, the annual payment back then was $0.15, compared to the most recent full-year payment of $0.56. This means that it has been growing its distributions at 14% per annum over that time. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

Dividend Growth May Be Hard To Come By

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. Over the past five years, it looks as though Marine Products' EPS has declined at around 8.6% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends.

Marine Products' Dividend Doesn't Look Sustainable

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Marine Products (of which 1 is concerning!) you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.