Until the end of the 2013 financial year Metcash Limited (ASX: MTS) was one of the most consistent high-yield stocks on the ASX. It was commonplace for investors to expect Metcash's dividend yield to exceed 7% or 8% as the group paid out between 80% and 90% of a growing earnings base.
12% Yield
Metcash is now trading on a trailing yield of over 10% fully franked, however this isn't because of a massively profitable year, rather it's the result of the share price more than halving from $3.25 a year earlier to $1.46 today.
Metcash's dividend payout of 15.5 cents over the last 12 month is a far cry from the 28 cent payout in the 2012 and 2013 financial years, while earnings have dropped from 38 cents per share in 2012 to a forecast 21 cents this year (the financial year ends in April).
Looking Forward
Most investors in Metcash should now be able to see the writing on the wall. Metcash's Australian operations are under severe threat from the duopoly of Wesfarmers Ltd (ASX: WES) and Woolworths Limited (ASX: WOW), which now itself is being threatened by Costco and Aldi.
Metcash's earnings are going to be lower, not higher, in the future and I doubt that the group will see out the next 10 years in its current form. Analysts are predicting a further 21% fall in earnings per share this year, to 21 cents, and are expecting the payout ratio to fall to 60% so that Metcash can invest in the stores it supplies in an attempt to boost sales.
Can Metcash Limited repeat its 12% dividend yield in 2015?
In short, no. Analysts are predicting a dividend per share payout of 12.5 cents in both the 2015 and 2016 financial years. At the current price of around $1.50, this still represents a strong yield of 8.3%, grossed up to 12% before tax. However, I would not count on that payout being higher in two, three or five years' time.