The board of Microequities Asset Management Group Limited (ASX:MAM) has announced that it will be increasing its dividend by 5.6% on the 7th of March to A$0.019, up from last year's comparable payment of A$0.018. This will take the annual payment to 6.2% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Microequities Asset Management Group

Microequities Asset Management Group's Payment Could Potentially Have Solid Earnings Coverage

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. The last dividend was quite easily covered by Microequities Asset Management Group's earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share could rise by 16.8% over the next year if the trend from the last few years continues. 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

Looking back, Microequities Asset Management Group's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 6 years was A$0.02 in 2019, and the most recent fiscal year payment was A$0.038. This means that it has been growing its distributions at 11% per annum over that time. Microequities Asset Management Group has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Microequities Asset Management Group has seen EPS rising for the last five years, at 17% per annum. The company is paying a reasonable amount of earnings to shareholders, and is growing earnings at a decent rate so we think it could be a decent dividend stock.

Microequities Asset Management Group Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. To that end, Microequities Asset Management Group has 3 warning signs (and 1 which is significant) we think 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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