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The board of Metro Inc. (TSE:MRU) has announced that it will be paying its dividend of CA$0.37 on the 11th of March, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 1.6%, providing a nice boost to shareholder returns.
View our latest analysis for Metro
Metro's Projected Earnings Seem Likely To Cover Future Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. However, Metro's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
The next year is set to see EPS grow by 27.3%. If the dividend continues on this path, the payout ratio could be 28% by next year, which we think can be pretty sustainable going forward.
Metro Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the dividend has gone from CA$0.40 total annually to CA$1.48. This implies that the company grew its distributions at a yearly rate of about 14% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend Looks Likely To Grow
Investors could be attracted to the stock based on the quality of its payment history. Metro has impressed us by growing EPS at 10% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.
Metro Looks Like A Great Dividend Stock
Overall, a dividend increase is always good, and we think that Metro is a strong income stock thanks to its track record and growing earnings. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 9 analysts we track are forecasting for Metro for free with public analyst estimates for the company. Is Metro 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.