Metro (TSE:MRU) Will Pay A Larger Dividend Than Last Year At CA$0.3025
Metro Inc. (TSE:MRU) will increase its dividend from last year's comparable payment on the 6th of March to CA$0.3025. This will take the dividend yield to an attractive 1.7%, providing a nice boost to shareholder returns.
Check out our latest analysis for Metro
Metro's Payment Has Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, Metro's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
The next year is set to see EPS grow by 22.8%. If the dividend continues on this path, the payout ratio could be 28% by next year, which we think can be pretty sustainable going forward.
Metro Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of CA$0.287 in 2013 to the most recent total annual payment of CA$1.21. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
Dividend Growth Potential Is Shaky
Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Earnings per share has been sinking by 14% over the last five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. However, the next year is actually looking up, with earnings set to rise. We would just wait until it becomes a pattern before getting too excited.
In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Without at least some growth in earnings per share over time, the dividend will eventually come under pressure either from competition or inflation. Businesses can change though, and we think it would make sense to see what analysts are forecasting for the company. 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.
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