Yahoo Finance Only Three Days Left To Cash In On Metro's (TSE:MRU) Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Metro Inc. (TSE:MRU) is about to trade ex-dividend in the next 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Metro's shares on or after the 14th of February will not receive the dividend, which will be paid on the 12th of March.
The company's upcoming dividend is CA$0.335 a share, following on from the last 12 months, when the company distributed a total of CA$1.34 per share to shareholders. Based on the last year's worth of payments, Metro has a trailing yield of 1.9% on the current stock price of CA$69.26. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Metro has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Metro
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. Metro paid out a comfortable 28% of its profit last year. A useful secondary check can be to evaluate whether Metro generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 32% of the free cash flow it generated, which is a comfortable payout ratio.
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?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Metro's earnings per share have fallen at approximately 9.1% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Metro has delivered an average of 15% per year annual increase in its dividend, based on the past 10 years of dividend payments.
The Bottom Line
Should investors buy Metro for the upcoming dividend? Metro has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Metro's dividend merits.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. In terms of investment risks, we've identified 2 warning signs with Metro and understanding them should be part of your investment process.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
