MDU Resources Group (NYSE:MDU) Has Re-Affirmed Its Dividend Of US$0.22

The board of MDU Resources Group, Inc. (NYSE:MDU) has announced that it will pay a dividend on the 1st of July, with investors receiving US$0.22 per share. The dividend yield will be 3.3% based on this payment which is still above the industry average.

View our latest analysis for MDU Resources Group

MDU Resources Group's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, MDU Resources Group's earnings easily covered the dividend, but free cash flows were negative. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.

Looking forward, earnings per share is forecast to rise by 19.1% over the next year. If the dividend continues on this path, the payout ratio could be 42% by next year, which we think can be pretty sustainable going forward.

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 2012 to the most recent annual payment of US$0.87. This implies that the company grew its distributions at a yearly rate of about 3.0% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

MDU Resources Group 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 MDU Resources Group has been growing its earnings per share at 7.8% a 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.

In Summary

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think MDU Resources Group is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for MDU Resources Group (1 is concerning!) that you should be aware of before investing. 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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