Yahoo Finance Mercer International (NASDAQ:MERC) Has Announced A Dividend Of $0.075
Mercer International Inc. (NASDAQ:MERC) will pay a dividend of $0.075 on the 3rd of July. This means the dividend yield will be fairly typical at 3.6%.
View our latest analysis for Mercer International
Mercer International's Dividend Is Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn't mean too much. Despite not generating a profit, Mercer International is still paying a dividend. Along with this, it is also not generating free cash flows, which raises concerns about the sustainability of the dividend.
The next year is set to see EPS grow by 145.7%. If the dividend continues on this path, the payout ratio could be 18% by next year, which we think can be pretty sustainable going forward.
Mercer International's Dividend Has Lacked Consistency
Looking back, Mercer International's dividend hasn't been particularly consistent. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. Since 2015, the dividend has gone from $0.46 total annually to $0.30. This works out to be a decline of approximately 4.6% per year 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.
Dividend Growth Potential Is Shaky
Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Mercer International's EPS has fallen by approximately 14% per year during the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. 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.
Mercer International's Dividend Doesn't Look Great
Overall, this isn't a great candidate as an income investment, even though the dividend was stable this year. The company's earnings aren't high enough to be making such big distributions, and it isn't backed up by strong growth or consistency either. Overall, this doesn't get us very excited from an income standpoint.
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. Taking the debate a bit further, we've identified 2 warning signs for Mercer International that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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