Microequities Asset Management Group Limited (ASX:MAM) has announced that it will be increasing its periodic dividend on the 7th of March to A$0.019, which will be 5.6% higher than last year's comparable payment amount of A$0.018. This will take the dividend yield to an attractive 6.2%, providing a nice boost to shareholder returns.

See our latest analysis for Microequities Asset Management Group

Microequities Asset Management Group's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. The last dividend was quite easily covered by Microequities Asset Management Group's earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS could expand by 16.8% if recent trends continue. If the dividend continues on this path, the payout ratio could be 59% by next year, which we think can be pretty sustainable going forward.

Microequities Asset Management Group's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. The dividend has gone from an annual total of A$0.02 in 2019 to the most recent total annual payment of A$0.038. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. It is great to see strong growth in the dividend payments, but cuts are concerning as it may indicate the payout policy is too ambitious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Microequities Asset Management Group has seen EPS rising for the last five years, at 17% per annum. Shareholders are getting plenty of the earnings returned to them, which combined with strong growth makes this quite appealing.

Microequities Asset Management Group Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Microequities Asset Management Group is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 3 warning signs for Microequities Asset Management Group (1 makes us a bit uncomfortable!) that you should be aware of before investing. 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.