Martinrea International Inc.'s (TSE:MRE) investors are due to receive a payment of CA$0.05 per share on 15th of January. The dividend yield is 2.1% based on this payment, which is a little bit low compared to the other companies in the industry.

See our latest analysis for Martinrea International

Martinrea International's Future Dividend Projections Appear Well Covered By Earnings

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, prior to this announcement, Martinrea International's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 52.6% over the next year. If the dividend continues on this path, the payout ratio could be 10% by next year, which we think can be pretty sustainable going forward.

Martinrea International Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of CA$0.12 in 2014 to the most recent total annual payment of CA$0.20. This implies that the company grew its distributions at a yearly rate of about 5.2% over that duration. Dividends have grown at a reasonable rate over this period, and without any major cuts in the payment over time, we think this is an attractive combination as it provides a nice boost to shareholder returns.

Dividend Growth Is Doubtful

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Martinrea International's EPS has declined at around 7.5% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.