Metrofile Holdings (JSE:MFL) Will Pay A Dividend Of ZAR0.09

The board of Metrofile Holdings Limited (JSE:MFL) has announced that it will pay a dividend on the 9th of October, with investors receiving ZAR0.09 per share. This means the annual payment will be 6.0% of the current stock price, which is lower than the industry average.

See our latest analysis for Metrofile Holdings

Metrofile Holdings' Earnings Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. The last dividend was quite easily covered by Metrofile Holdings' earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 0.4% if recent trends continue. Assuming the dividend continues along recent trends, we think the payout ratio could be 56% by next year, which is in a pretty sustainable range.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of ZAR0.09 in 2013 to the most recent total annual payment of ZAR0.18. This means that it has been growing its distributions at 7.2% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Metrofile Holdings might have put its house in order since then, but we remain cautious.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Metrofile Holdings hasn't seen much change in its earnings per share over the last five years. Growth of 0.4% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This could mean the dividend doesn't have the growth potential we look for going into the future.

Our Thoughts On Metrofile Holdings' Dividend

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. 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 4 warning signs for Metrofile Holdings that investors need to be conscious of moving forward. Is Metrofile Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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