Mannatech, Incorporated's (NASDAQ:MTEX) dividend will be increasing to US$0.20 on 29th of September. This will take the annual payment from 2.4% to 5.0% of the stock price, which is above what most companies in the industry pay.
Mannatech's Earnings Easily Cover the Distributions
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Mannatech's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
If the trend of the last few years continues, EPS will grow by 58.7% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.
Mannatech's Dividend Has Lacked Consistency
Looking back, Mannatech's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The dividend has gone from US$0.50 in 2016 to the most recent annual payment of US$0.80. This implies that the company grew its distributions at a yearly rate of about 9.9% over that duration. We have seen cuts in the past, so while the growth looks promising we would be a little bit cautious about its track record.
The Dividend Looks Likely To Grow
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. Mannatech has impressed us by growing EPS at 59% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
We Really Like Mannatech's Dividend
Overall, a dividend increase is always good, and we think that Mannatech is a strong income stock thanks to its track record and growing earnings. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 4 warning signs for Mannatech that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.
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