Marshall Monteagle's (JSE:MMP) Dividend Will Be $0.3453

The board of Marshall Monteagle PLC (JSE:MMP) has announced that it will pay a dividend on the 2nd of August, with investors receiving $0.3453 per share. This means the annual payment will be 2.3% of the current stock price, which is lower than the industry average.

See our latest analysis for Marshall Monteagle

Marshall Monteagle Doesn't Earn Enough To Cover Its Payments

Even a low dividend yield can be attractive if it is sustained for years on end. Prior to this announcement, Marshall Monteagle's earnings easily covered the dividend, but free cash flows were negative. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

Earnings per share could rise by 34.1% over the next year if things go the same way as they have for the last few years. Assuming the dividend continues along recent trends, we think the payout ratio could reach 515%, which probably can't continue without starting to put some pressure on the balance sheet.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The annual payment during the last 10 years was $0.036 in 2014, and the most recent fiscal year payment was $0.0364. Dividend payments have grown at less than 1% a year over this period. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. We are encouraged to see that Marshall Monteagle has grown earnings per share at 34% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Our Thoughts On Marshall Monteagle's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Marshall Monteagle's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. 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. For instance, we've picked out 1 warning sign for Marshall Monteagle that investors should take into consideration. Is Marshall Monteagle not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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