Myer Holdings' (ASX:MYR) Dividend Will Be Reduced To A$0.01
Myer Holdings Limited (ASX:MYR) has announced that on 16th of November, it will be paying a dividend ofA$0.01, which a reduction from last year's comparable dividend. This means the annual payment is 7.8% of the current stock price, which is above the average for the industry.
Check out our latest analysis for Myer Holdings
Myer Holdings Doesn't Earn Enough To Cover Its Payments
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite easily covered by Myer Holdings' earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.
EPS is set to fall by 13.8% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio could reach 120%, which could put the dividend in jeopardy if the company's earnings don't improve.
Dividend Volatility
While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2013, the annual payment back then was A$0.19, compared to the most recent full-year payment of A$0.05. Dividend payments have fallen sharply, down 74% over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend Looks Likely To Grow
Given that dividend payments have been shrinking like a glacier in a warming world, we need to check if there are some bright spots on the horizon. We are encouraged to see that Myer Holdings has grown earnings per share at 57% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Myer Holdings could prove to be a strong dividend payer.
We Really Like Myer Holdings' Dividend
It is generally not great to see the dividend being cut, but we don't think this should happen much if at all in the future given that Myer Holdings has the makings of a solid income stock moving forward. By reducing the dividend, pressure will be taken off the balance sheet, which could help the dividend to be consistent in the future. All of these factors considered, we think this has solid potential as a dividend stock.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Myer Holdings (1 shouldn't be ignored!) that you should be aware of before investing. Is Myer Holdings 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.
