MAAS Group Holdings Limited's (ASX:MGH) dividend is being reduced from last year's payment covering the same period to A$0.03 on the 29th of September. This means that the dividend yield is 1.9%, which is a bit low when comparing to other companies in the industry.

See our latest analysis for MAAS Group Holdings

MAAS Group Holdings' Earnings Easily Cover The Distributions

The dividend yield is a little bit low, but sustainability of the payments is also an important part of evaluating an income stock. Prior to this announcement, MAAS Group Holdings' earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 98.5%. Assuming the dividend continues along recent trends, we think the payout ratio could be 15% by next year, which is in a pretty sustainable range. historic-dividend

MAAS Group Holdings' Dividend Has Lacked Consistency

Looking back, the dividend has been unstable but with a relatively short history, we think it may be a bit early to draw conclusions about long term dividend sustainability. Since 2021, the dividend has gone from A$0.04 total annually to A$0.06. This means that it has been growing its distributions at 22% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that MAAS Group Holdings has grown earnings per share at 26% per year over the past three years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.



Our Thoughts On MAAS Group Holdings' Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. While MAAS Group Holdings is earning enough to cover the payments, the cash flows are lacking. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 4 warning signs for MAAS Group Holdings (of which 1 is concerning!) you should know about. 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.