Marcus' (NYSE:MCS) Dividend Will Be $0.07

The board of The Marcus Corporation (NYSE:MCS) has announced that it will pay a dividend of $0.07 per share on the 17th of March. This means the annual payment is 1.3% of the current stock price, which is above the average for the industry.

See our latest analysis for Marcus

Marcus' Future Dividend Projections Seem Positive

A big dividend yield for a few years doesn't mean much if it can't be sustained. Even though Marcus isn't generating a profit, it is generating healthy free cash flows that easily cover the dividend. In general, cash flows are more important than the more traditional measures of profit so we feel pretty comfortable with the dividend at this level.

According to analysts, EPS should be several times higher next year. If the dividend continues along recent trends, we estimate the payout ratio will be 11%, so there isn't too much pressure on the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was $0.38 in 2015, and the most recent fiscal year payment was $0.28. The dividend has shrunk at around 3.0% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.

The Company Could Face Some Challenges Growing The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Marcus has seen EPS rising for the last five years, at 17% per annum. It's not great that the company is not turning a profit, but the decent growth in recent years is certainly a positive sign. If the company can become profitable soon, continuing on this trajectory would bode well for the future of the dividend.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. We don't think Marcus is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Marcus that investors need to be conscious of moving forward. Is Marcus 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.