Manhattan Bridge Capital, Inc. (NASDAQ:LOAN) stock is about to trade ex-dividend in 4 days time. You can purchase shares before the 9th of October in order to receive the dividend, which the company will pay on the 15th of October.
Manhattan Bridge Capital's upcoming dividend is US$0.1 a share, following on from the last 12 months, when the company distributed a total of US$0.5 per share to shareholders. Last year's total dividend payments show that Manhattan Bridge Capital has a trailing yield of 7.4% on the current share price of $6.47. If you buy this business for its dividend, you should have an idea of whether Manhattan Bridge Capital's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.
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. Manhattan Bridge Capital paid out 103% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances.
Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see Manhattan Bridge Capital's earnings have been skyrocketing, up 28% per annum for the past five years.
We'd also point out that Manhattan Bridge Capital issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Manhattan Bridge Capital has delivered 51% dividend growth per year on average over the past six years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
From a dividend perspective, should investors buy or avoid Manhattan Bridge Capital? It's been growing earnings per share at a pleasant rate, although its dividend payout was not well covered by earnings. We think there are likely better opportunities out there.
Keen to explore more data on Manhattan Bridge Capital's financial performance? Check out our visualisation of its historical revenue and earnings growth.
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 email@example.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.