Yahoo Finance Methode Electronics (NYSE:MEI) Is Due To Pay A Dividend Of $0.14
Methode Electronics, Inc. (NYSE:MEI) has announced that it will pay a dividend of $0.14 per share on the 26th of July. This means the annual payment is 5.4% of the current stock price, which is above the average for the industry.
See our latest analysis for Methode Electronics
Methode Electronics Doesn't Earn Enough To Cover Its Payments
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Methode Electronics is unprofitable despite paying a dividend, and it is paying out 103% of its free cash flow. These payout levels would generally be quite difficult to keep up.
The next 12 months is set to see EPS grow by 110.7%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio getting very high over the next year.
Methode Electronics Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.28 in 2014 to the most recent total annual payment of $0.56. This means that it has been growing its distributions at 7.2% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.
The Dividend Has Limited Growth Potential
The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Methode Electronics' EPS has declined at around 19% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.
Methode Electronics' Dividend Doesn't Look Sustainable
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 1 warning sign for Methode Electronics that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.
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