News of a dividend increase is terrific news if you’re an income investor. It means that you’re collecting more dividend income than you were before, without having to do anything. You get rewarded simply for hanging onto a stock. Dividend increases are never a guarantee and while in some cases they may be predictable, the rate of the increase can vary.
Last week, Canadian restaurant company MTY Food Group (TSX:MTY) announced a generous 18% increase to its dividend. Going forward, it will be paying a quarterly dividend of $0.33, versus the $0.28 it was previously paying. Its next dividend is payable on Feb. 14. With the increase, the stock now yields 2.6%. If you want to collect approximately $1,000 in dividends over the course of a full year, you would need to invest around $38,500 into the stock based on its current yield.
The company has earnings coming up in February and so news of this increase suggests that its results are likely strong. It franchises and operates more than 7,000 quick-service restaurants around the world. Its portfolio includs brands such as Jugo Juice, Mr. Sub, and Mucho Burrito.
MTY has been focusing on improving its cash flow and in its most recent quarter, the company posted an impressive 29% increase in operating cash flow. The boost in liquidity is likely a key reason MTY felt comfortable in raising its dividend, and suggests that its next quarterly results will continue to show a similar trend.
In the past three months, MTY’s stock has risen by around 9%.
