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Attention dividend hunters! Mueller Water Products, Inc. (NYSE:MWA) will be distributing its dividend of US$0.05 per share on the 20 May 2019, and will start trading ex-dividend in 2 days time on the 09 May 2019. What does this mean for current shareholders and potential investors? Below, I will explain how holding Mueller Water Products can impact your portfolio income stream, by analysing the stock's most recent financial data and dividend attributes.
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Will the company be able to keep paying dividend based on the future earnings growth?
How does Mueller Water Products fare?
Mueller Water Products has a trailing twelve-month payout ratio of 107%, which means that the dividend is not well-covered by its earnings. In the near future, analysts are predicting a more sensible payout ratio of 30%, which, assuming the share price stays the same, leads to a dividend yield of 1.9%. Moreover, EPS should increase to $0.48, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there is one thing that you want to be reliable in your life, it's dividend stocks and their constant income stream. In the case of MWA it has increased its DPS from $0.070 to $0.20 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
In terms of its peers, Mueller Water Products has a yield of 1.8%, which is on the low-side for Machinery stocks.
Taking into account the dividend metrics, Mueller Water Products ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three key factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for MWA’s future growth? Take a look at our free research report of analyst consensus for MWA’s outlook.
- Valuation: What is MWA worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether MWA is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.