MDU Resources Group (NYSE:MDU) Has Affirmed Its Dividend Of US$0.21

MDU Resources Group, Inc. (NYSE:MDU) has announced that it will pay a dividend of US$0.21 per share on the 1st of October. This means the dividend yield will be fairly typical at 2.6%.

Check out our latest analysis for MDU Resources Group

MDU Resources Group's 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. Based on the last dividend, MDU Resources Group is earning enough to cover the payment, but the it makes up 145% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Looking forward, earnings per share is forecast to rise by 5.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 40% by next year, which is in a pretty sustainable range.

MDU Resources Group Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from US$0.65 in 2011 to the most recent annual payment of US$0.85. This means that it has been growing its distributions at 2.7% per annum over that time. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that MDU Resources Group has grown earnings per share at 14% per year over the past five years. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

Our Thoughts On MDU Resources Group'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. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. We don't think MDU Resources Group is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for MDU Resources Group that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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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.
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