Mercer International (NASDAQ:MERC) Will Pay A Dividend Of $0.075
The board of Mercer International Inc. (NASDAQ:MERC) has announced that it will pay a dividend of $0.075 per share on the 4th of October. This means the dividend yield will be fairly typical at 3.7%.
View our latest analysis for Mercer International
Mercer International's Dividend Is Well Covered By Earnings
Solid dividend yields are great, but they only really help us if the payment is sustainable. Even in the absence of profits, Mercer International 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. If the dividend continues along recent trends, we estimate the payout ratio will be 7.8%, so there isn't too much pressure on the dividend.
Mercer International's Dividend Has Lacked Consistency
Mercer International has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. Since 2015, the annual payment back then was $0.46, compared to the most recent full-year payment of $0.30. The dividend has shrunk at around 5.2% a year during that period. A company that decreases its dividend over time generally isn't what we are looking for.
The Company Could Face Some Challenges Growing The Dividend
Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. Mercer International has seen EPS rising for the last five years, at 15% per annum. Even though the company isn't making a profit, strong earnings growth could turn that around in the near future. Assuming the company can post positive net income numbers soon, it could has the potential to be a decent dividend payer.
The Dividend Could Prove To Be Unreliable
Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 2 warning signs for Mercer International that investors should take into consideration. Is Mercer International 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.
