5 things we like about Moneysupermarket.com’s dividend

Cash dividend payouts from Moneysupermarket.com (LON:MONY) have made it one of the most popular shares in the market in recent years. But at a time of economic uncertainty, even the biggest and best known companies are at risk of setbacks. So what should you know about the Moneysupermarket.com dividend?

1. Moneysupermarket.com’s stellar dividend yield

Dividend yield is one of the best ways of comparing payouts and gauging share valuations across the market. The current average forecast yield across the market this year stands at 3.4% - or £3.40 in dividends for every £100 of shares you hold. But remember that while high yields are appealing, excessive yields can be a warning that the share price has fallen and the dividend may be at risk.

• Moneysupermarket.com has a solid dividend yield of 3.6% at the time of publication – and for the reasons below, we think that’s here to stay.

2. Can it realistically continue to pay such a high dividend, in light of Covid?

Dividend payouts are an important part of the total return that investors get from shares. But in challenging times a company may not make enough money to pay a dividend. That might not be a problem, but consistently low dividend cover (the measure of the company's net income over the dividend paid) can be a warning. Dividend cover of less than 1x suggests the company can’t fund its payout from current year earnings, and you may need to look at why.

• Moneysupermarket.com has dividend cover of 1.5x on a trailing 12 month basis – suggesting that it will be able to sustain its dividend, despite the high yield.

3. What about the future prospects of Moneysupermarket.com’s dividend? Would Covid not affect this?

Dividend growth is important for income investors because it points to companies that are doing well and optimistic about their prospects. Growth in payouts also enhances the compounding effects of reinvested dividends over time. Some investors prefer dividend growth to high yield but be aware that some dividend stocks don’t raise their payouts very often (but still remain popular).

• Year-on-year, the dividend from Moneysupermarket.com has grown by 6.0%. Over the past decade, the payout has been raised 9 times. 

4. Has Moneysupermarket.com ever cut its dividend payout?

While long-term dividend growth is desirable, it’s just as important to know about dividend cuts. In times of economic jeopardy, dividends are often the first thing to be cancelled. But it’s the job of management to try and avoid this. A track record of dividend cuts can be a sign that the company isn’t fully in control of its circumstances or is being too ambitious with its payout.

Over the past 10 years, Moneysupermarket.com has delivered:

• 9 dividend increases.
• 0 dividend cuts.

That’s pretty strong momentum. On top of this, Moneysupermarket.com has a dividend streak of 10 – meaning that it paid a dividend for 10 consecutive years during the past decade. That suggests that it might be a reliable company to invest in for dividend income.

5. Besides dividends, does Moneysupermarket.com look like a good, improving, safe company to invest in?

Company quality is an important factor for dividend investors. That means holding profitable businesses with robust sales and solid cash flows. Those businesses need to be well managed, conservatively financed and have a track record of improving financial strength. As a result they are generally much less exposed to economic risks and other potential pitfalls.

These measures of quality can be found in the pages of company financial reports. Taken together, it’s possible to make an overall assessment of a company’s quality and compare it against the rest of the market.

• Based on Stockopedia’s calculations, Moneysupermarket.com has a Quality Rank of 96 - where zero is poor and 100 is excellent.

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 cut or cancelled very quickly when the outlook changes.

To get a fuller understanding of the dividend prospects for any stock, it's important to do some investigation yourself. Indeed, we've identified areas of concern with Moneysupermarket.Com that you can find out about here.