MGP Ingredients (NASDAQ:MGPI) Is Due To Pay A Dividend Of $0.12

MGP Ingredients, Inc.'s (NASDAQ:MGPI) investors are due to receive a payment of $0.12 per share on 29th of August. This means the annual payment will be 1.7% of the current stock price, which is lower than the industry average.

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MGP Ingredients' Long-term Dividend Outlook appears Promising

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Even though MGP Ingredients isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.

Analysts expect a massive rise in earnings per share in the next year. If the dividend extends its recent trend, estimates say the dividend could reach 63%, which we would be comfortable to see continuing.

Check out our latest analysis for MGP Ingredients

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 dividend has gone from an annual total of $0.05 in 2015 to the most recent total annual payment of $0.48. This works out to be a compound annual growth rate (CAGR) of approximately 25% a year over that time. MGP Ingredients has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth May Be Hard To Achieve

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. In the last five years, MGP Ingredients' earnings per share has shrunk at approximately 3.7% per annum. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. 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 can turn into a longer term trend.

MGP Ingredients' 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 be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 MGP Ingredients that investors should take into consideration. Is MGP Ingredients not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.