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Masterflex SE (ETR:MZX) has announced that it will be increasing its dividend from last year's comparable payment on the 13th of June to €0.20. Even though the dividend went up, the yield is still quite low at only 1.9%.
See our latest analysis for Masterflex
Masterflex's Dividend Is Well Covered By Earnings
If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, Masterflex's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to expand by 36.5%. If the dividend continues on this path, the payout ratio could be 23% by next year, which we think can be pretty sustainable going forward.
Masterflex Is Still Building Its Track Record
It is great to see that Masterflex 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. The annual payment during the last 6 years was €0.05 in 2017, and the most recent fiscal year payment was €0.20. This implies that the company grew its distributions at a yearly rate of about 26% over that duration. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
The Dividend Looks Likely To Grow
The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Masterflex has grown earnings per share at 12% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
We Really Like Masterflex's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Masterflex that you should be aware of before investing. Is Masterflex not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.