Methode Electronics (NYSE:MEI) Is Due To Pay A Dividend Of $0.14

Methode Electronics, Inc. (NYSE:MEI) has announced that it will pay a dividend of $0.14 per share on the 28th of October. This payment means that the dividend yield will be 1.5%, which is around the industry average.

See our latest analysis for Methode Electronics

Methode Electronics' Payment Has Solid Earnings Coverage

We aren't too impressed by dividend yields unless they can be sustained over time. However, Methode Electronics' earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 19.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 19% by next year, which is in a pretty sustainable range.

Methode Electronics Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2012, the annual payment back then was $0.28, compared to the most recent full-year payment of $0.56. This works out to be a compound annual growth rate (CAGR) of approximately 7.2% a year over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

The Dividend's Growth Prospects Are Limited

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. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

We Really Like Methode Electronics' Dividend

Overall, we like to see the dividend staying consistent, and we think Methode Electronics might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. As an example, we've identified 1 warning sign for Methode Electronics 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.