Yahoo Finance Magellan Aerospace (TSE:MAL) Has Affirmed Its Dividend Of CA$0.025
Magellan Aerospace Corporation (TSE:MAL) has announced that it will pay a dividend of CA$0.025 per share on the 28th of March. This means the annual payment will be 1.2% of the current stock price, which is lower than the industry average.
View our latest analysis for Magellan Aerospace
Magellan Aerospace's Dividend Is Well Covered By Earnings
Even a low dividend yield can be attractive if it is sustained for years on end. Even in the absence of profits, Magellan Aerospace is paying a dividend. The company is also yet to generate cash flow, so the dividend sustainability is definitely questionable.
Looking forward, earnings per share is forecast to rise exponentially over the next year. Assuming the dividend continues along recent trends, we think the payout ratio will be 10%, which makes us pretty comfortable with the sustainability of the dividend.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was CA$0.12 in 2014, and the most recent fiscal year payment was CA$0.10. The dividend has shrunk at around 1.8% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.
The Dividend Has Limited Growth Potential
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Magellan Aerospace's earnings per share has shrunk at 69% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.
We're Not Big Fans Of Magellan Aerospace's Dividend
Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Considering all of these factors, we wouldn't rely on this dividend if we wanted to live on the income.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. See if management have their own wealth at stake, by checking insider shareholdings in Magellan Aerospace stock. Is Magellan Aerospace 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.
