Monro's (NASDAQ:MNRO) Dividend Will Be $0.28

Monro, Inc.'s (NASDAQ:MNRO) investors are due to receive a payment of $0.28 per share on 19th of June. Based on this payment, the dividend yield will be 2.6%, which is fairly typical for the industry.

See our latest analysis for Monro

Monro's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Before this announcement, Monro was paying out 77% of earnings, but a comparatively small 20% of free cash flows. This leaves plenty of cash for reinvestment into the business.

EPS is set to grow by 20.5% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 81% - on the higher side, but we wouldn't necessarily say this is unsustainable.

Monro Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2013, the dividend has gone from $0.40 total annually to $1.12. This means that it has been growing its distributions at 11% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Dividend Growth May Be Hard To Come By

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, things aren't all that rosy. In the last five years, Monro's earnings per share has shrunk at approximately 8.5% per annum. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

Our Thoughts On Monro's Dividend

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 company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. As an example, we've identified 1 warning sign for Monro that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.