Methode Electronics (NYSE:MEI) Has Affirmed Its Dividend Of $0.14
The board of Methode Electronics, Inc. (NYSE:MEI) has announced that it will pay a dividend on the 27th of October, with investors receiving $0.14 per share. The dividend yield will be 2.5% based on this payment which is still above the industry average.
While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Methode Electronics' stock price has reduced by 41% in the last 3 months, which is not ideal for investors and can explain a sharp increase in the dividend yield.
See our latest analysis for Methode Electronics
Methode Electronics' Earnings Easily Cover The Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, Methode Electronics' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 42.9% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 27%, which is in the range that makes us comfortable with the sustainability of the dividend.
Methode Electronics Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.28 in 2013 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. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.
Dividend Growth May Be Hard To Achieve
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. However, Methode Electronics' EPS was effectively flat over the past five years, which could stop the company from paying more every year.
In Summary
Overall, we think Methode Electronics is a solid choice as a dividend stock, even though the dividend wasn't raised this year. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've picked out 1 warning sign for Methode Electronics that investors should know about before committing capital to this stock. Is Methode Electronics 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.
