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MONY Group plc (LON:MONY) has announced that it will be increasing its dividend from last year's comparable payment on the 16th of May to £0.092. This takes the dividend yield to 6.7%, which shareholders will be pleased with.
MONY Group's Future Dividend Projections Appear Well Covered By Earnings
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before this announcement, MONY Group was paying out 83% of earnings, but a comparatively small 69% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.
The next year is set to see EPS grow by 24.7%. If the dividend continues along recent trends, we estimate the payout ratio will be 69%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.
See our latest analysis for MONY Group
MONY Group Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was £0.08 in 2015, and the most recent fiscal year payment was £0.125. This implies that the company grew its distributions at a yearly rate of about 4.6% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.
The Dividend's Growth Prospects Are Limited
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Let's not jump to conclusions as things might not be as good as they appear on the surface. It's not great to see that MONY Group's earnings per share has fallen at approximately 3.2% per year over the past five years. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think MONY Group's payments are rock solid. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We don't think MONY Group is a great stock to add to your portfolio if income is your focus.