Yahoo Finance Here's What We Like About Metro Inc. (TSE:MRU)'s Upcoming Dividend
Metro Inc. (TSE:MRU) stock is about to trade ex-dividend in 3 days time. This means that investors who purchase shares on or after the 3rd of September will not receive the dividend, which will be paid on the 25th of September.
Metro's next dividend payment will be CA$0.20 per share, on the back of last year when the company paid a total of CA$0.80 to shareholders. Last year's total dividend payments show that Metro has a trailing yield of 1.4% on the current share price of CA$56.19. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Metro
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Metro paying out a modest 29% of its earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year it paid out 57% of its free cash flow as dividends, within the usual range for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Metro, with earnings per share up 2.2% on average over the last five years. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Metro has delivered 17% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Final Takeaway
Is Metro an attractive dividend stock, or better left on the shelf? Earnings per share have been growing at a steady rate, and Metro paid out less than half its profits and more than half its free cash flow as dividends over the last year. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.
Ever wonder what the future holds for Metro? See what the eight analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
