Mosaic's (NYSE:MOS) Shareholders Will Receive A Bigger Dividend Than Last Year

The Mosaic Company (NYSE:MOS) will increase its dividend from last year's comparable payment on the 21st of December to $0.20. Based on this payment, the dividend yield for the company will be 2.3%, which is fairly typical for the industry.

See our latest analysis for Mosaic

Mosaic's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. However, Mosaic's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 46.0% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could be 26%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.

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 annual payment during the last 10 years was $1.00 in 2013, and the most recent fiscal year payment was $0.80. The dividend has shrunk at around 2.2% a year during that period. 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

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. Mosaic has seen EPS rising for the last five years, at 56% per annum. 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 Mosaic's Dividend

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All of these factors considered, we think this has solid potential as a dividend stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Mosaic (of which 1 is a bit unpleasant!) you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.