Do These 3 Checks Before Buying Macerich Company (NYSE:MAC) For Its Upcoming 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 Macerich Company (NYSE:MAC) is about to go ex-dividend in just 4 days. This means that investors who purchase shares on or after the 16th of August will not receive the dividend, which will be paid on the 6th of September.
Macerich's next dividend payment will be US$0.75 per share, and in the last 12 months, the company paid a total of US$3.00 per share. Looking at the last 12 months of distributions, Macerich has a trailing yield of approximately 9.8% on its current stock price of $30.5. If you buy this business for its dividend, you should have an idea of whether Macerich's dividend is reliable and sustainable. So we need to investigate whether Macerich can afford its dividend, and if the dividend could grow.
See our latest analysis for Macerich
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Its dividend payout ratio is 80% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth It could become a concern if earnings started to decline. While Macerich seems to be paying out a very high percentage of its income, REITs have different dividend payment behaviour and so, while we don't think this is great, we also don't think it is unusual. A useful secondary check can be to evaluate whether Macerich generated enough free cash flow to afford its dividend. Macerich paid out more free cash flow than it generated - 133%, to be precise - last year, which we think is concerningly high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.
Macerich paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Were this to happen repeatedly, this would be a risk to Macerich's ability to maintain its dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. So we're not too excited that Macerich's earnings are down 3.8% a year over the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Macerich's dividend payments per share have declined at 0.6% per year on average over the past 10 years, which is uninspiring.
To Sum It Up
Is Macerich an attractive dividend stock, or better left on the shelf? It's definitely not great to see earnings per share shrinking. The company paid out an acceptable percentage of its income, but an uncomfortably high percentage of its cash flow over the past year. With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Macerich.
Wondering what the future holds for Macerich? See what the seven analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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 editorial-team@simplywallst.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.
