Michael Hill International Limited's (ASX:MHJ) periodic dividend will be increasing on the 24th of March to A$0.04, with investors receiving 14% more than last year's A$0.035. This will take the dividend yield to an attractive 7.6%, providing a nice boost to shareholder returns.

See our latest analysis for Michael Hill International

Michael Hill International's Dividend Is Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Michael Hill International's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Looking forward, earnings per share is forecast to rise by 30.8% over the next year. If the dividend continues on this path, the payout ratio could be 51% by next year, which we think can be pretty sustainable going forward. historic-dividend

Michael Hill International's Dividend Has Lacked Consistency

Michael Hill International has been paying dividends for a while, but the track record isn't stellar. Due to this, we are a little bit cautious about the dividend consistency over a full economic cycle. The annual payment during the last 7 years was A$0.0466 in 2016, and the most recent fiscal year payment was A$0.08. This means that it has been growing its distributions at 8.0% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Michael Hill International might have put its house in order since then, but we remain cautious.

The Dividend's Growth Prospects Are Limited

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Unfortunately, Michael Hill International's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year.

Our Thoughts On Michael Hill International's Dividend

In summary, while it's always good to see the dividend being raised, we don't think Michael Hill International's payments are rock solid. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.



It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Michael Hill International (1 doesn't sit too well with us!) that you should be aware of before investing. Is Michael Hill International not quite the opportunity you were looking for? Why not check out our selection of top 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.

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