MGIC Investment (NYSE:MTG) Will Pay A Larger Dividend Than Last Year At $0.115
MGIC Investment Corporation (NYSE:MTG) will increase its dividend from last year's comparable payment on the 24th of August to $0.115. This will take the annual payment to 2.7% of the stock price, which is above what most companies in the industry pay.
Check out our latest analysis for MGIC Investment
MGIC Investment's Payment Has Solid Earnings Coverage
A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, MGIC Investment was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to fall by 12.9%. Assuming the dividend continues along recent trends, we believe the payout ratio could be 21%, which we are pretty comfortable with and we think is feasible on an earnings basis.
MGIC Investment Is Still Building Its Track Record
Looking back, the dividend has been stable, but the company hasn't been paying a dividend for very long so we can't be confident that the dividend will remain stable through all economic environments. The dividend has gone from an annual total of $0.24 in 2019 to the most recent total annual payment of $0.46. This implies that the company grew its distributions at a yearly rate of about 18% 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
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that MGIC Investment has grown earnings per share at 22% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.
We Really Like MGIC Investment's 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 earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. To that end, MGIC Investment has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield 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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