The board of MA Financial Group Limited (ASX:MAF) has announced that it will pay a dividend of A$0.06 per share on the 18th of September. This means the dividend yield will be fairly typical at 3.9%.
View our latest analysis for MA Financial Group
MA Financial Group’s Earnings Easily Cover The Distributions
Unless the payments are sustainable, the dividend yield doesn’t mean too much. Based on the last payment, the dividend made up 86% of cash flows, but a higher proportion of net income. While the cash payout ratio isn’t necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.
Over the next year, EPS is forecast to expand by 167.3%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 59% which would be quite comfortable going to take the dividend forward.
MA Financial Group Is Still Building Its Track Record
It is great to see that MA Financial Group has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2017, the annual payment back then was A$0.07, compared to the most recent full-year payment of A$0.20. This means that it has been growing its distributions at 16% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can’t know for sure if payment can continue to grow over the long term, so caution may be warranted.
MA Financial Group May Find It Hard To Grow The Dividend
Some investors will be chomping at the bit to buy some of the company’s stock based on its dividend history. However, things aren’t all that rosy. MA Financial Group hasn’t seen much change in its earnings per share over the last five years.
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 MA Financial Group’s payments, as there could be some issues with sustaining them into the future. The payments are bit high to be considered sustainable, and the track record isn’t the best. Overall, we don’t think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, MA Financial Group has 3 warning signs (and 1 which can’t be ignored) we think you should know about. Is MA Financial Group 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.
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