Mullen Group Ltd. T.MTL

RBC

[retiredcf]

Their current and upside scenario targets are $15.00 and $18.00. GLTA

May 3, 2022

Mullen Group Ltd.
Announces meaningful +20% dividend increase

Our view: neutral. MTL today announced a meaningful +20% increase to its monthly dividend, to $0.06 per share (from $0.05), which represents a forward dividend yield of 6% and a payout ratio of 60% of FCF on our 2022 estimates. Management noted in the release that the increase was based on the Board’s outlook for the economy as well as the Board’s view that redirecting a portion of FCF away from the buyback and toward the dividend would be in the best interests of shareholders at this time. Overall, we view this as a neutral read-through for the shares. On the one hand, the dividend increase in our view highlights the significant FCF that Mullen generates as well as favourable Q1 exit trends, both of which we think are underappreciated by the market. On the other hand, however, the dividend increase may signal less opportunity on the acquisition front—a potential negative in our view.

Key points:

Revising estimates. We update our estimates following the dividend increase announced today. Our monthly dividend estimate increases to $0.06 (from $0.05). We also correct for a corporate elimination in our 2022 revenue and expense estimates; no change to EBITDA estimates, however. Our 2022 and 2023 EBITDA estimates remain at $266MM and $274MM, respectively. See Exhibit 1.

What happened? MTL today announced that its Board of Directors has approved an increase to the company’s monthly dividend, from $0.05 to $0.06 per Common Share. This represents a +20% increase from the prior dividend and equates to an annualized dividend of $0.72 per share. This increase will be effective as of the next regular dividend payment, which is expected to be payable on June 15, 2022, to shareholders of record on May 31, 2022.