Mosaic (NYSE:MOS) Is Due To Pay A Dividend Of $0.21

The Mosaic Company (NYSE:MOS) will pay a dividend of $0.21 on the 19th of December. This makes the dividend yield 3.2%, which is above the industry average.

Check out our latest analysis for Mosaic

Mosaic'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. Prior to this announcement, Mosaic was paying out 72% of earnings and more than 75% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but we don't think that there are necessarily signs that the dividend might be unsustainable.

Over the next year, EPS is forecast to expand by 94.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 34% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was $1.00 in 2014, and the most recent fiscal year payment was $0.84. Doing the maths, this is a decline of about 1.7% per year. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Mosaic has seen EPS rising for the last five years, at 31% per annum. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Mosaic is not retaining those earnings to reinvest in growth.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Mosaic will make a great income stock. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Mosaic has been making. We don't think Mosaic is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for Mosaic that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield 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.