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Important news for shareholders and potential investors in Marlin Business Services Corp. (NASDAQ:MRLN): The dividend payment of US$0.14 per share will be distributed to shareholders on 23 May 2019, and the stock will begin trading ex-dividend at an earlier date, 10 May 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Marlin Business Services's latest financial data to analyse its dividend characteristics.
5 checks you should do on a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown over the past?
- Can it afford to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does Marlin Business Services pass our checks?
Marlin Business Services has a trailing twelve-month payout ratio of 29%, which means that the dividend is covered by earnings. However, going forward, analysts expect MRLN's payout to fall to 21% of its earnings. Assuming a constant share price, this equates to a dividend yield of 2.5%. However, EPS should increase to $2.44, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider Marlin Business Services as a dividend investment. It has only been consistently paying dividends for 8 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Marlin Business Services generates a yield of 2.5%, which is high for Diversified Financial stocks but still below the market's top dividend payers.
If Marlin Business Services is in your portfolio for cash-generating reasons, there may be better alternatives out there. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company's fundamentals and underlying business before making an investment decision. I've put together three fundamental aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for MRLN’s future growth? Take a look at our free research report of analyst consensus for MRLN’s outlook.
- Valuation: What is MRLN worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether MRLN is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.