Munters Group AB (publ) (STO:MTRS) dividend will increase to 0.85 kr on May 26. This makes the dividend yield about the same as the industry average at 1.2%.
Discover our latest analysis for Munters Group
Munters Group payment has strong revenue coverage
Unless the payouts are sustainable, the dividend yield doesn’t mean much. However, based on the last payout, Munters Group was earning enough to cover the dividend quite comfortably. However, with over 75% of free cash flow paid to shareholders, future growth could potentially be limited.
Going forward, earnings per share are expected to increase 25.0% over the next year. Assuming the dividend continues on recent trends, we think the payout ratio could be 30% by next year, which is in a fairly sustainable range.
Munters Group dividend lacks consistency
In retrospect, the dividend has been volatile, but with a relatively short history, we believe it may be a bit early to draw conclusions about the long-term sustainability of the dividend. Since 2018, the first annual payment was 0.30 kr, compared to 0.85 kr for the last annual payment. This means that it has increased its distributions by 30% per year during this period. Despite rapid dividend growth over the past few years, we have also seen payouts decline in the past, which makes us cautious.
Dividend growth potential is fragile
Since the dividend has been reduced in the past, we need to check if earnings are increasing and if this could lead to higher dividends in the future. Over the past five years, it appears that Munters Group EPS has declined by around 11% per year. A sharp drop in earnings per share is not terrible from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall enough. Over the next year, however, earnings should actually rise, but we will remain cautious until a track record of earnings growth can be established.
Our reflection on the Munters Group dividend
Overall, it’s probably not a great income stock, even though the dividend is being increased right now. The company has not paid a very consistent dividend over time, although it has only paid out a small portion of profits. Overall, we don’t think this company has the makings of a good income stock.
Market movements testify to the valuation of a consistent dividend policy over a more unpredictable one. Meanwhile, despite the importance of dividend payments, these are not the only factors our readers should be aware of when evaluating a company. For example, we identified 1 warning sign for Munters Group which you should be aware of before investing. We have also formed a list of global stocks with a strong dividend.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.