Mattioli Woods (LON:MTW) Has Announced That It Will Be Increasing Its Dividend To £0.18

Simply Wall St · 09/15/2023 05:03

The board of Mattioli Woods plc (LON:MTW) has announced that the dividend on 3rd of November will be increased to £0.18, which will be 1.1% higher than last year's payment of £0.178 which covered the same period. This makes the dividend yield 4.3%, which is above the industry average.

Check out our latest analysis for Mattioli Woods

Mattioli Woods' 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, Mattioli Woods was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Over the next year, EPS is forecast to expand by 179.2%. Assuming the dividend continues along recent trends, we think the payout ratio could be 72% by next year, which is in a pretty sustainable range.

AIM:MTW Historic Dividend September 15th 2023

Mattioli Woods Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The annual payment during the last 10 years was £0.0603 in 2013, and the most recent fiscal year payment was £0.266. This implies that the company grew its distributions at a yearly rate of about 16% 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.

Dividend Growth Potential Is Shaky

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Unfortunately things aren't as good as they seem. Mattioli Woods' earnings per share has shrunk at 14% a year over the past five years. A sharp decline in earnings per share is not great from from a dividend perspective. Even conservative payout ratios can come under pressure if earnings fall far enough. On the bright side, earnings are predicted to gain some ground over the next year, but until this turns into a pattern we wouldn't be feeling too comfortable.

Our Thoughts On Mattioli Woods' Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 1 warning sign for Mattioli Woods that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.