Meritage Homes' (NYSE:MTH) Shareholders Will Receive A Bigger Dividend Than Last Year
Meritage Homes Corporation (NYSE:MTH) has announced that it will be increasing its dividend from last year's comparable payment on the 29th of March to $0.75. Based on this payment, the dividend yield for the company will be 1.9%, which is fairly typical for the industry.
See our latest analysis for Meritage Homes
Meritage Homes' Payment Has Solid Earnings Coverage
We aren't too impressed by dividend yields unless they can be sustained over time. However, Meritage Homes' earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to fall by 4.6%. If the dividend continues along recent trends, we estimate the payout ratio could be 8.0%, which we consider to be quite comfortable, with most of the company's earnings left over to grow the business in the future.
Meritage Homes Doesn't Have A Long Payment History
It is tough to make a judgement on how stable a dividend is when the company hasn't been paying one for very long. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Meritage Homes has been growing its earnings per share at 29% a year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.
We Really Like Meritage Homes' Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The distributions are easily covered by earnings, and there is plenty of cash being generated as well. We should point out that the earnings are expected to fall over the next 12 months, which won't be a problem if this doesn't become a trend, but could cause some turbulence in the next year. All of these factors considered, we think this has solid potential as a dividend stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 2 warning signs for Meritage Homes you should be aware of, and 1 of them makes us a bit uncomfortable. Is Meritage Homes 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.
