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

The board of Methode Electronics, Inc. (NYSE:MEI) has announced that it will pay a dividend of US$0.14 per share on the 29th of July. 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' Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, Methode Electronics' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

EPS is set to fall by 9.6% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 21%, which is comfortable for the company to continue in the future.

Methode Electronics Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2012, the dividend has gone from US$0.28 to US$0.56. This means that it has been growing its distributions at 7.2% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Methode Electronics Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see Methode Electronics has been growing its earnings per share at 5.1% a year over the past five years. Methode Electronics definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low 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 generating plenty of cash, and the earnings also quite easily cover the distributions. 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 in all, this checks a lot of the boxes we look for when choosing an income stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 3 Methode Electronics analysts we track are forecasting continued growth with our free report on analyst estimates for the company. If you are a dividend investor, you might also want to look at our curated list of high yield 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.