Yahoo Finance Four Days Left Until Melcor Developments Ltd. (TSE:MRD) Trades Ex-Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Melcor Developments Ltd. (TSE:MRD) is about to go ex-dividend in just 4 days. Ex-dividend means that investors that purchase the stock on or after the 14th of September will not receive this dividend, which will be paid on the 30th of September.
Melcor Developments's next dividend payment will be CA$0.08 per share. Last year, in total, the company distributed CA$0.32 to shareholders. Based on the last year's worth of payments, Melcor Developments has a trailing yield of 5.1% on the current stock price of CA$6.32. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Melcor Developments
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. Melcor Developments paid out a comfortable 38% of its profit last year. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 28% of its free cash flow in the past year.
It's positive to see that Melcor Developments's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see how much of its profit Melcor Developments paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're discomforted by Melcor Developments's 19% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Melcor Developments has increased its dividend at approximately 2.5% a year on average.
To Sum It Up
Has Melcor Developments got what it takes to maintain its dividend payments? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. In summary, it's hard to get excited about Melcor Developments from a dividend perspective.
In light of that, while Melcor Developments has an appealing dividend, it's worth knowing the risks involved with this stock. To help with this, we've discovered 5 warning signs for Melcor Developments (2 shouldn't be ignored!) that you ought to be aware of before buying the shares.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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