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Madison Pacific Properties Inc. (TSE:MPC) has announced that it will pay a dividend of CA$0.0525 per share on the 4th of September. Based on this payment, the dividend yield on the company's stock will be 2.0%, which is an attractive boost to shareholder returns.
Check out our latest analysis for Madison Pacific Properties
Madison Pacific Properties Might Find It Hard To Continue The Dividend
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Even though Madison Pacific Properties is not generating a profit, it is still paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.
Over the next year, EPS might fall by 21.7% based on recent performance. This will push the company into unprofitability, which means the managers will have to choose between suspending the dividend, or paying it out of cash reserves.
Madison Pacific Properties Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The last annual payment of CA$0.105 was flat on the annual payment from10 years ago. Slow and steady dividend growth might not sound that exciting, but dividends have been stable for ten years, which we think makes this a fairly attractive offer.
The Dividend Has Limited Growth Potential
The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Earnings per share has been sinking by 22% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future.
Madison Pacific Properties' Dividend Doesn't Look Sustainable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. Although they have been consistent in the past, we think the payments are a little high to be sustained. Overall, we don't think this company has the makings of a good income stock.
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 4 warning signs for Madison Pacific Properties that investors should take into consideration. Is Madison Pacific Properties not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.