The board of Myers Industries, Inc. (NYSE:MYE) has announced that it will pay a dividend of $0.135 per share on the 4th of April. The dividend yield will be 4.1% based on this payment which is still above the industry average.
View our latest analysis for Myers Industries
Estimates Indicate Myers Industries' Could Struggle to Maintain Dividend Payments In The Future
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 279% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 37%. Healthy cash flows are always a positive sign, especially when they quite easily cover the dividend.
The next 12 months is set to see EPS grow by 68.9%. If the dividend continues on its recent course, the payout ratio in 12 months could be 167%, which is a bit high and could start applying pressure to the balance sheet.
Myers Industries Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $0.52 in 2015, and the most recent fiscal year payment was $0.54. Its dividends have grown at less than 1% per annum over this time frame. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.
The Dividend Has Limited Growth Potential
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. However, initial appearances might be deceiving. Myers Industries' EPS has fallen by approximately 22% per year during the past five years. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future. 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 becomes a long 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. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would be a touch cautious of relying on this stock primarily for the dividend income.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. To that end, Myers Industries has 4 warning signs (and 1 which is significant) we think you should know about. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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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.