Canada markets closed
  • S&P/TSX

    20,758.34
    +17.94 (+0.09%)
     
  • S&P 500

    4,136.48
    -43.28 (-1.04%)
     
  • DOW

    33,926.01
    -127.89 (-0.38%)
     
  • CAD/USD

    0.7460
    -0.0007 (-0.09%)
     
  • CRUDE OIL

    73.54
    +0.15 (+0.20%)
     
  • BTC-CAD

    30,714.89
    -751.75 (-2.39%)
     
  • CMC Crypto 200

    525.40
    -11.46 (-2.14%)
     
  • GOLD FUTURES

    1,888.80
    +12.20 (+0.65%)
     
  • RUSSELL 2000

    1,985.53
    -15.69 (-0.78%)
     
  • 10-Yr Bond

    3.5320
    +0.1360 (+4.00%)
     
  • NASDAQ futures

    12,575.50
    -48.50 (-0.38%)
     
  • VOLATILITY

    18.33
    -0.40 (-2.14%)
     
  • FTSE

    7,901.80
    +81.64 (+1.04%)
     
  • NIKKEI 225

    27,743.88
    +234.42 (+0.85%)
     
  • CAD/EUR

    0.6909
    -0.0004 (-0.06%)
     

MDU Resources Group (NYSE:MDU) Is Increasing Its Dividend To $0.2225

The board of MDU Resources Group, Inc. (NYSE:MDU) has announced that the dividend on 1st of January will be increased to $0.2225, which will be 2.3% higher than last year's payment of $0.218 which covered the same period. This takes the dividend yield to 2.8%, which shareholders will be pleased with.

See our latest analysis for MDU Resources Group

MDU Resources Group's Earnings Easily Cover The Distributions

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last payment, MDU Resources Group's earnings were much higher than the dividend, but it wasn't converting those earnings into cash flow. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

The next year is set to see EPS grow by 55.8%. If the dividend continues on this path, the payout ratio could be 35% by next year, which we think can be pretty sustainable going forward.

historic-dividend
historic-dividend

MDU Resources Group Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. Since 2012, the annual payment back then was $0.67, compared to the most recent full-year payment of $0.87. This works out to be a compound annual growth rate (CAGR) of approximately 2.6% a year over that time. Dividends have grown relatively slowly, which is not great, but some investors may value the relative consistency of the dividend.

MDU Resources Group Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that MDU Resources Group has been growing its earnings per share at 6.6% a year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think MDU Resources Group is a great stock to add to your portfolio if income is your focus.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Just as an example, we've come across 2 warning signs for MDU Resources Group you should be aware of, and 1 of them can't be ignored. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here