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Mountview Estates P.L.C. (LON:MTVW) will pay a dividend of £2.50 on the 31st of March. This makes the dividend yield 6.2%, which will augment investor returns quite nicely.
View our latest analysis for Mountview Estates
Mountview Estates' Payment Could Potentially Have Solid Earnings Coverage
If the payments aren't sustainable, a high yield for a few years won't matter that much. 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
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. Since 2015, the annual payment back then was £2.00, compared to the most recent full-year payment of £5.50. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.
Dividend Growth May Be Hard To Achieve
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, Mountview Estates' earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.
Mountview Estates' 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. The payments are bit high to be considered sustainable, and the track record isn't the best. We don't think Mountview Estates is a great stock to add to your portfolio if income is your focus.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, Mountview Estates has 2 warning signs (and 1 which is potentially serious) we think you should know about. Is Mountview Estates not quite the opportunity you were looking for? Why not check out our selection of top 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.