Yahoo Finance Interested In Mondi's (LON:MNDI) Upcoming €0.20 Dividend? You Have Three Days Left
Mondi plc (LON:MNDI) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Mondi's shares before the 26th of August to receive the dividend, which will be paid on the 30th of September.
The company's upcoming dividend is €0.20 a share, following on from the last 12 months, when the company distributed a total of €0.61 per share to shareholders. Based on the last year's worth of payments, Mondi stock has a trailing yield of around 2.6% on the current share price of £20.44. If you buy this business for its dividend, you should have an idea of whether Mondi's dividend is reliable and sustainable. So we need to investigate whether Mondi can afford its dividend, and if the dividend could grow.
See our latest analysis for Mondi
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. Mondi is paying out an acceptable 51% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Mondi generated enough free cash flow to afford its dividend. It paid out more than half (67%) of its free cash flow in the past year, which is within an average range for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. 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 not enthused to see that Mondi's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Mondi has delivered an average of 12% per year annual increase in its dividend, based on the past 10 years of dividend payments.
To Sum It Up
Has Mondi got what it takes to maintain its dividend payments? Mondi has been unable to generate earnings growth, but at least its dividend looks sustainable, with its profit and cashflow payout ratios within reasonable limits. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.
With that being said, if you're still considering Mondi as an investment, you'll find it beneficial to know what risks this stock is facing. For example, we've found 2 warning signs for Mondi that we recommend you consider before investing in the business.
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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
