MDU Resources Group (NYSE:MDU) Has Affirmed Its Dividend Of $0.2225
MDU Resources Group, Inc.'s (NYSE:MDU) investors are due to receive a payment of $0.2225 per share on 1st of July. The dividend yield will be 3.0% based on this payment which is still above the industry average.
Check out our latest analysis for MDU Resources Group
MDU Resources Group's Payment Has Solid Earnings Coverage
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. 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. Since a dividend means the company is paying out cash to investors, this could prove to be a problem in the future.
The next year is set to see EPS grow by 29.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 38% by next year, which is in a pretty sustainable range.
MDU Resources Group Has A Solid Track Record
The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.67 in 2013 to the most recent total annual payment of $0.89. This implies that the company grew its distributions at a yearly rate of about 2.9% over that duration. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
MDU Resources Group May Find It Hard To Grow The Dividend
Investors could be attracted to the stock based on the quality of its payment history. Earnings has been rising at 4.3% per annum over the last five years, which admittedly is a bit slow. Growth of 4.3% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.
In Summary
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think MDU Resources Group is a great stock to add to your portfolio if income is your focus.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, MDU Resources Group has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. Is MDU Resources Group 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.
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