Mosaic (NYSE:MOS) Has Announced That It Will Be Increasing Its Dividend To $0.20

The Mosaic Company (NYSE:MOS) has announced that it will be increasing its dividend from last year's comparable payment on the 21st of September to $0.20. The payment will take the dividend yield to 2.1%, which is in line with the average for the industry.

Check out our latest analysis for Mosaic

Mosaic's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. However, prior to this announcement, Mosaic's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 43.4% over the next 12 months. Assuming the dividend continues along recent trends, we believe the payout ratio could be 24%, which we are pretty comfortable with and we think is feasible on an earnings basis.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2013, the annual payment back then was $1.00, compared to the most recent full-year payment of $0.80. The dividend has shrunk at around 2.2% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that Mosaic has been growing its earnings per share at 56% a 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.

Mosaic Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Mosaic has 3 warning signs (and 1 which is concerning) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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