Updated 3/11/25
McGrath RentCorp (MGRC) has built a strong presence in the rental industry, serving businesses, schools, and government agencies with modular buildings, portable storage, electronic testing equipment, and environmental solutions. With a history spanning more than four decades, the company has established itself as a reliable player in the industry.
For dividend investors, consistency is key. MGRC fits the profile of a stable, income-generating stock with a track record of delivering shareholder returns. The company has increased its dividend for 34 consecutive years, making it an attractive option for those looking to build passive income over the long term.
Below, we’ll take a closer look at MGRC’s dividend profile, its financial health, and whether the company has what it takes to keep rewarding investors well into the future.
Key Dividend Metrics
📈 Dividend Yield: 1.76%
💰 Annual Dividend per Share: $1.94
🛡 Payout Ratio: 20.04%
⏳ Dividend Growth Streak: 34 consecutive years
📆 Next Ex-Dividend Date: April 16, 2025
While the dividend yield may not be the highest in the market, MGRC’s consistency, financial stability, and history of dividend growth make it a stock worth watching for income-focused investors.
Dividend Overview
MGRC currently offers a dividend yield of 1.76%, which is slightly below its five-year average of 2.06%. A lower-than-average yield can often indicate that the stock price has appreciated, rather than signaling any weakness in the dividend itself.
One of the biggest positives for MGRC is its conservative payout ratio of 20.04%. This means the company is only using a small portion of its earnings to pay dividends, leaving room for reinvestment in growth, debt reduction, and further dividend increases. Compared to many dividend-paying industrial stocks, which often have payout ratios closer to 40% or more, MGRC’s disciplined approach provides a strong foundation for sustainability.
For those seeking a reliable income stream, MGRC pays dividends on a quarterly basis. The next scheduled payout is $0.485 per share, set for April 30, 2025, for shareholders who own the stock by April 16.
Dividend Growth and Safety
One of MGRC’s standout features is its commitment to consistent dividend growth. The company has raised its dividend for 34 straight years, demonstrating a strong ability to navigate different economic cycles while still rewarding shareholders.
Over the past five years, dividends have increased at an average annual rate of 5.8%. While this isn’t the fastest growth in the market, it’s a solid pace for an industrial company. More importantly, it reflects a well-managed balance between returning capital to shareholders and reinvesting in the business.
Several factors contribute to the safety of MGRC’s dividend:
🔹 A low payout ratio of just over 20%, ensuring dividends are well-covered by earnings
🔹 Strong earnings per share of $9.43, providing a solid financial buffer
🔹 Consistent cash flow generation, with operating cash flow at $374.38 million
🔹 A relatively low beta of 0.74, meaning the stock is less volatile than the broader market
Even if the economy slows down, MGRC has plenty of room to maintain or even continue growing its dividend.
Chart Analysis
Price Action and Moving Averages
The price movement of McGrath RentCorp (MGRC) over the past year has shown a mix of trends, with periods of both strength and weakness. The stock is currently trading near 111.15, which aligns closely with its longer-term support levels.
The 50-day moving average (orange line) had been trending above the 200-day moving average (blue line) for a significant part of the uptrend seen in late 2024. However, recent price action shows the stock declining below the 50-day moving average, which is now sloping downward. This shift suggests that short-term momentum is weakening. Meanwhile, the 200-day moving average remains relatively flat, signaling that the broader trend is neutral to slightly bullish.
A key area of interest is the intersection of these moving averages. The 50-day moving average previously crossed above the 200-day moving average in late 2024, a classic golden cross pattern that typically signals the start of an uptrend. However, as the stock has pulled back recently, the potential for a death cross, where the 50-day moves below the 200-day, could indicate further downside if selling pressure persists.
Volume Activity
Volume levels have been relatively steady, except for a large spike that occurred around October. That high-volume day suggests a major event, possibly earnings or news-related, that drove a significant move in the stock price. Since then, volume has returned to lower levels, showing that traders have been less active in recent weeks.
This declining volume, especially on the recent pullback, suggests that selling pressure is not necessarily aggressive, but rather part of a normal correction after the strong run-up seen from November to February. If volume begins to rise again alongside an upward move in price, that would indicate renewed buying interest and potential for the stock to recover lost ground.
Relative Strength Index (RSI)
The RSI indicator at the bottom of the chart shows that MGRC was in overbought territory earlier in the year when it hit its peak near 130 but has since been trending downward. Currently, the RSI sits in a neutral range, meaning the stock is neither overbought nor oversold.
When RSI approaches the 30 level, it typically suggests that a stock is oversold and could be due for a bounce. However, if RSI remains weak and continues to decline, it would indicate that selling momentum is still present. Conversely, a push back above 50 would be a sign that buyers are stepping back in and the stock is regaining strength.
Key Levels to Watch
One of the most important levels to watch is the 110 to 112 price range, which is where the stock is currently sitting. This level has acted as both support and resistance in the past, making it a key battleground for buyers and sellers. If the stock holds above this area and starts moving higher, it could indicate that demand remains strong.
If the stock fails to hold above this level, the next key support area is around 105 to 106, where price previously found a floor before the last major rally. A break below this would signal further downside risk.
On the upside, resistance can be seen near 120, which was tested multiple times earlier in the year. A breakout above this level could pave the way for another move toward the previous highs near 130.
Analyst Ratings
Upgrades
📈 Sidoti & Co. recently upgraded McGrath RentCorp (MGRC) from a hold to a strong buy, raising their price target to $127. This decision was driven by strong financial results, consistent revenue growth, and the company’s ability to effectively manage costs. MGRC’s expansion into new markets also played a key role in the upgrade, as analysts see long-term growth potential in its diversified rental business.
💡 Oppenheimer has maintained a buy rating on MGRC, with steady increases in its price targets over time. The firm initially raised its target from $120 to $124, then later adjusted it to $139 as they saw continued strength in the company’s financials. Their bullish stance is supported by MGRC’s strong operating margins and ability to generate solid cash flow.
Downgrades
⚠️ Sidoti & Co. had previously downgraded MGRC from a buy to a neutral due to concerns about slowing growth in certain rental segments. Analysts pointed to market saturation in some areas and increasing competition, which could pressure margins and limit upside potential. They suggested a more cautious stance until the company demonstrates sustained momentum in key markets.
📉 StockNews.com issued a recent downgrade from a buy to a hold, citing signs of a plateau in MGRC’s earnings growth. Analysts flagged potential industry-wide challenges, such as higher operating costs and economic uncertainty, which could slow demand for rental equipment. They recommended waiting for clearer signs of continued revenue acceleration before taking a more aggressive stance.
Consensus Price Target
📊 The current consensus price target for MGRC stands at $145.50, indicating an estimated 26.68% upside from its recent trading levels. The highest analyst target is $152, while the most conservative estimate is $139.
Overall, MGRC has received mixed ratings, with some analysts highlighting its financial stability and long-term expansion potential, while others urge caution due to competitive pressures and possible economic headwinds. Investors will want to weigh these perspectives when evaluating MGRC’s future performance.
Earnings Report Summary
McGrath RentCorp (MGRC) recently shared its latest earnings results, and overall, the company had a solid quarter with strong financial performance. There were some areas of growth and a few challenges, but the numbers show a business that’s continuing to expand while maintaining profitability.
Fourth Quarter Highlights
Revenue for the fourth quarter came in at $243.75 million, which was a 10% increase from the same period last year. That kind of steady growth is always a good sign, showing that demand remains strong across most of the company’s segments.
Net income for the quarter reached $38.95 million, up from $32.02 million a year ago. Earnings per share followed suit, rising to $1.58 from $1.30. Higher earnings are a direct reflection of MGRC’s ability to manage costs while expanding its rental operations.
Full-Year Performance
For the entire year, MGRC pulled in $910.94 million in total revenue, up 10% from the previous year. Net income jumped to $231.73 million, a significant increase from $174.62 million in 2023. Earnings per share also saw a nice boost, reaching $9.43 compared to $7.12 last year. These numbers suggest that MGRC has been executing well on its strategy, keeping revenue climbing while maintaining solid profitability.
Business Segment Breakdown
The Mobile Modular segment was one of the bright spots, with an 8% growth in rental revenue during the fourth quarter. Sales revenue in this division surged by 32%, which suggests strong demand for MGRC’s modular solutions.
On the other hand, the Portable Storage segment saw a 15% decline in rental revenue. This drop was mainly due to weaker demand from the commercial construction sector, which has slowed down in certain regions.
The TRS-RenTelco division also faced some challenges, with rental revenue falling by 9%. This decline was largely tied to market conditions and shifts in customer demand.
Fleet Utilization
Fleet utilization stood at 75.1%, slightly lower than the previous year’s 76.3%. This is a minor dip, but nothing that signals any major issues. It just means that some rental assets weren’t in use as much as before, which can fluctuate based on customer demand.
Dividend Increase
One thing dividend investors will appreciate is MGRC’s commitment to increasing payouts. The company announced a 2% increase in its quarterly dividend, bumping it up to $0.485 per share. This marks the 34th consecutive year of dividend growth, which is an impressive streak that underscores MGRC’s financial stability.
Looking Ahead
For 2025, MGRC expects revenue to land somewhere between $920 million and $970 million, with projected adjusted EBITDA between $345 million and $360 million. This outlook suggests the company is confident in its ability to keep growing, even as certain sectors face some headwinds.
Overall, MGRC’s latest earnings report highlights a business that continues to move in the right direction. There are a few challenges in specific segments, but the overall financial picture remains strong, and the company seems well-positioned for another year of steady performance.
Financial Health and Stability
A company’s ability to sustain its dividend ultimately comes down to financial strength. MGRC has demonstrated solid revenue growth and profitability, which are crucial factors for dividend stability.
Profitability and Earnings Strength
📊 Revenue (TTM): $910.94 million, up 10% year over year
📈 Net Income (TTM): $231.73 million, reflecting a 21.7% annual increase
⚡ Operating Margin: 25.76%, a sign of strong profitability
📉 Debt-to-Equity Ratio: 53.66%, showing a balanced approach to leveraging
Revenue has continued to grow steadily, with a 10% increase in the past year. Net income is also trending higher, up over 21% year over year. A healthy operating margin of 25.76% suggests that MGRC is efficiently managing costs while maintaining strong profitability.
Balance Sheet Strength
MGRC carries a manageable level of debt, with total debt standing at $602.83 million. Its debt-to-equity ratio of 53.66% indicates a moderate level of leverage, which is expected for an asset-heavy business like this.
While total cash holdings are relatively low at $807,000, the company’s ability to generate strong cash flow offsets this concern. With $79.09 million in free cash flow, MGRC has plenty of flexibility to fund future dividend increases, reinvest in its business, or reduce debt as needed.
Valuation and Stock Performance
Beyond dividend payments, it’s important to consider valuation and stock performance to determine if an investment offers a good balance of income and capital appreciation potential.
Valuation Metrics
📉 Trailing P/E: 11.66, which is low compared to industry peers
📈 Forward P/E: 17.79, suggesting moderate growth expectations
📊 PEG Ratio: 1.15, indicating the stock is fairly valued based on its growth rate
📊 Price-to-Book Ratio: 2.40, within a reasonable range for the sector
With a trailing price-to-earnings ratio of 11.66, MGRC appears to be trading at a reasonable valuation. A PEG ratio of 1.15 suggests that the stock is fairly valued based on expected growth, making it neither a deep bargain nor overpriced.
Stock Performance
Over the past year, MGRC’s stock has climbed 28.34%, outpacing the broader market’s return of 27.7%. The stock has traded between $95.50 and $129.93 over the last 52 weeks, with its current price sitting in the upper half of that range.
A beta of 0.74 suggests that MGRC is less volatile than the overall market, which is a positive trait for conservative investors seeking steady returns.
Risks and Considerations
While MGRC has a lot of positives, no stock is without risks. Here are some key factors that investors should keep in mind:
🛠 Economic Sensitivity – As a rental services provider, MGRC’s business is tied to economic conditions. A slowdown in construction or industrial activity could impact demand.
📉 Stock Price Volatility – Although it has a relatively low beta, price fluctuations can occur, particularly during market-wide downturns.
💸 Debt Load – While manageable, MGRC does carry debt. Rising interest rates or an economic downturn could impact its ability to invest in future growth.
🏢 Competitive Pressures – The rental industry is competitive, and pricing pressures could affect profitability in the long term.
These risks don’t take away from MGRC’s strengths but should be considered when evaluating the stock for a long-term dividend portfolio.
Final Thoughts
McGrath RentCorp stands out as a well-managed company with a strong track record of dividend growth, financial stability, and consistent profitability. With a low payout ratio and strong cash flow, the company has the flexibility to continue increasing dividends for years to come.
Its stock valuation appears reasonable, and its low volatility makes it a relatively stable choice in uncertain market conditions. While there are risks related to economic cycles and competition, MGRC’s ability to generate consistent earnings and cash flow should provide confidence to long-term investors.
For those looking for a reliable dividend stock with room for growth, MGRC is worth keeping on the radar.