Mueller Water Products (NYSE:MWA) Is Paying Out A Dividend Of $0.061
The board of Mueller Water Products, Inc. (NYSE:MWA) has announced that it will pay a dividend on the 22nd of May, with investors receiving $0.061 per share. This payment means that the dividend yield will be 1.8%, which is around the industry average.
See our latest analysis for Mueller Water Products
Mueller Water Products' Earnings Easily Cover The Distributions
Unless the payments are sustainable, the dividend yield doesn't mean too much. Before making this announcement, Mueller Water Products was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.
The next year is set to see EPS grow by 60.7%. Assuming the dividend continues along recent trends, we think the payout ratio could be 32% by next year, which is in a pretty sustainable range.
Mueller Water Products Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of $0.07 in 2013 to the most recent total annual payment of $0.244. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.
The Dividend's Growth Prospects Are Limited
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, initial appearances might be deceiving. Over the past five years, it looks as though Mueller Water Products' EPS has declined at around 4.8% a year. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.
In Summary
Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Mueller Water Products has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Is Mueller Water Products 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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