Why MP Evans performs well in the pursuit of dividend income


In times of economic turmoil, income investors face tough choices about where to look for the best returns – just like the dividends offered by a stock like MP Evans (LON: MPE) worth exploring further?

With so much uncertainty over the sustainability of some dividends, it’s understandable that investors are looking for the best payouts available. Part of the challenge is that attractive yielding stocks can often turn out to be a mirage. Dividend cuts have become widespread. market over the past year. The pain for investors is real. So what should you look for in the search for sustainable dividend income?

Here is a checklist of actions and a summary of the reasons MP Evans dividend scores well against them …


1. High dividend yield (but not excessive)

Yield is an important dividend measure because it tells you the percentage of how much a company pays out in dividends each year relative to its share price. This makes it easier to compare dividend payments across the market.

High returns are obviously attractive, but beware of excessively high returns (usually over 10%) as they can be a sign of trouble. When the market suspects that a company may not be able to sustain its dividend, the stock price drops and drives up returns, which can be a trap. We must therefore be wary of excessive returns.

2. Dividend growth

Another important marker for income investors is a history of dividend growth – and evidence that growth will continue. Consistent dividend growth can be a clue for companies that carefully manage their distribution policies – and reward their shareholders over time. Rather than aggressively distributing profits, dividend growth companies tend to have more modest returns, but are more adept at sustaining their payouts.

  • MP Evans increased his dividend payout 5 times in the last 10 years – and the dividend per share is is expected to grow by 39.6% in the coming year.

3. Dividend security

Attractive, high returns obviously turn heads – but it’s important to know that a dividend is affordable. Dividend coverage (similar to payout ratio) is an essential measure of a company’s net income relative to the dividend paid to shareholders. It is calculated as the earnings per share divided by the dividend per share and helps indicate how sustainable a dividend is.

A dividend coverage of less than 1x suggests that the company cannot fund the payment from its current year profits – and could rely on other sources of funds to pay it.

What does this mean for potential investors?

Yield, growth and safety are the three main pillars that support some of the most popular dividend investing strategies. But it’s important to know that dividend payouts can be reduced or canceled very quickly when the outlook changes.

To better understand the dividend outlook for any stock, it’s important to investigate it yourself. Indeed, we have identified areas of concern regarding MP Evans that you can find here.

Alternatively, if you want to find more dividend stocks that might be worth investigating, you can find some ideas on this Dividend screen.

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