Mesa Laboratories, Inc.’s (NASDAQ:MLAB) investors are due to receive a payment of $0.16 per share on 15th of September. Based on this payment, the dividend yield on the company’s stock will be 0.7%, which is an attractive boost to shareholder returns.
A big dividend yield for a few years doesn’t mean much if it can’t be sustained. Even though Mesa Laboratories isn’t generating a profit, it is generating healthy free cash flows that easily cover the dividend. This gives us some comfort about the level of the dividend payments.
According to analysts, EPS should be several times higher next year. If the dividend extends its recent trend, estimates say the dividend could reach 37%, which we would be comfortable to see continuing.
Check out our latest analysis for Mesa Laboratories
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The annual payment during the last 10 years was $0.60 in 2015, and the most recent fiscal year payment was $0.64. 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.
Investors could be attracted to the stock based on the quality of its payment history. Let’s not jump to conclusions as things might not be as good as they appear on the surface. Earnings per share has been sinking by 79% over the last five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. 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.
Overall, it’s nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. The company is generating plenty of cash, but we still think the dividend is a bit high for comfort. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we’ve picked out 1 warning sign for Mesa Laboratories that investors should take into consideration. 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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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.