Methode Electronics (NYSE:MEI) Has Re-Affirmed Its Dividend Of US$0.14

Methode Electronics, Inc.'s (NYSE:MEI) investors are due to receive a payment of US$0.14 per share on 29th of July. This means the dividend yield will be fairly typical at 1.5%.

See our latest analysis for Methode Electronics

Methode Electronics' Earnings Easily Cover the Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Methode Electronics was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

The next year is set to see EPS grow by 4.6%. If the dividend continues on this path, the payout ratio could be 21% by next year, which we think can be pretty sustainable going forward.

Methode Electronics Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from US$0.28 in 2012 to the most recent annual payment of US$0.56. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

Methode Electronics May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Although it's important to note that Methode Electronics' earnings per share has basically not grown from where it was five years ago, which could erode the purchasing power of the dividend over time. If Methode Electronics is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Methode Electronics Looks Like A Great Dividend Stock

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Taking the debate a bit further, we've identified 2 warning signs for Methode Electronics that investors need to be conscious of moving forward. Is Methode Electronics 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.