Readers hoping to buy Manulife Financial Corporation (TSE:MFC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 18th of November in order to be eligible for this dividend, which will be paid on the 19th of December.
Manulife Financial's next dividend payment will be CA$0.3 per share, on the back of last year when the company paid a total of CA$1.0 to shareholders. Based on the last year's worth of payments, Manulife Financial stock has a trailing yield of around 3.8% on the current share price of CA$26.38. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Manulife Financial can afford its dividend, and if the dividend could grow.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see Manulife Financial paying out a modest 41% of its earnings.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Manulife Financial earnings per share are up 8.3% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Manulife Financial's dividend payments are effectively flat on where they were ten years ago.
The Bottom Line
Has Manulife Financial got what it takes to maintain its dividend payments? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. Overall, Manulife Financial looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Curious what other investors think of Manulife Financial? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.