Mannatech, Incorporated (NASDAQ:MTEX) has announced that it will be increasing its dividend on the 29th of September to US$0.20. This will take the dividend yield from 2.4% to 5.0%, providing a nice boost to shareholder returns.
Mannatech's Payment Has Solid Earnings Coverage
If the payments aren't sustainable, a high yield for a few years won't matter that much. However, Mannatech's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
If the trend of the last few years continues, EPS will grow by 58.7% over the next 12 months. Assuming the dividend continues along recent trends, we think the payout ratio could be 37% by next year, which is in a pretty sustainable range.
Mannatech's Dividend Has Lacked Consistency
Even in its relatively short history, the company has reduced the dividend at least once. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2016, the first annual payment was US$0.50, compared to the most recent full-year payment of US$0.80. This implies that the company grew its distributions at a yearly rate of about 9.9% over that duration. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.
The Dividend Looks Likely To Grow
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see Mannatech has been growing its earnings per share at 59% a year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.
Mannatech Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 4 warning signs for Mannatech that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our curated list of strong dividend payers.
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