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Mountview Estates P.L.C. (LON:MTVW) has announced that it will pay a dividend of £2.50 per share on the 31st of March. This makes the dividend yield 6.3%, which will augment investor returns quite nicely.
Check out our latest analysis for Mountview Estates
Mountview Estates' Future Dividend Projections Appear Well Covered By Earnings
A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Mountview Estates' dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 308% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.
EPS is set to fall by 1.5% over the next 12 months if recent trends continue. If recent patterns in the dividend continue, we could see the payout ratio reaching 82% in the next 12 months which is on the higher end of the range we would say is sustainable.
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 £2.00 in 2014 to the most recent total annual payment of £5.50. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Mountview Estates has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.
Mountview Estates May Find It Hard To Grow The Dividend
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. However, Mountview Estates' EPS was effectively flat over the past five years, which could stop the company from paying more every year.
The Dividend Could Prove To Be Unreliable
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Mountview Estates' payments, as there could be some issues with sustaining them into the future. The track record isn't great, and the payments are a bit high to be considered sustainable. We would be a touch cautious of relying on this stock primarily for the dividend income.
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. To that end, Mountview Estates has 2 warning signs (and 1 which is potentially serious) we think you should know about. 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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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.