Dividend Investors: Don't Be Too Quick To Buy Mattioli Woods plc (LON:MTW) For Its Upcoming Dividend
It looks like Mattioli Woods plc (LON:MTW) is about to go 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. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase Mattioli Woods' shares on or after the 15th of February will not receive the dividend, which will be paid on the 22nd of March.
The company's next dividend payment will be UK£0.09 per share, and in the last 12 months, the company paid a total of UK£0.27 per share. Based on the last year's worth of payments, Mattioli Woods stock has a trailing yield of around 4.6% on the current share price of UK£5.90. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Mattioli Woods has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Mattioli Woods
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. Mattioli Woods paid out 140% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance.
Generally, the higher a company's payout ratio, the more the dividend is at risk of being reduced.
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. Readers will understand then, why we're concerned to see Mattioli Woods's earnings per share have dropped 9.1% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Mattioli Woods has delivered 14% dividend growth per year on average over the past 10 years. That's intriguing, but the combination of growing dividends despite declining earnings can typically only be achieved by paying out a larger percentage of profits. Mattioli Woods is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.
The Bottom Line
Is Mattioli Woods worth buying for its dividend? Not only are earnings per share shrinking, but Mattioli Woods is paying out a disconcertingly high percentage of its profit as dividends. Generally we think dividend investors should avoid businesses in this situation, as high payout ratios and declining earnings can lead to the dividend being cut. Mattioli Woods doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.
So if you're still interested in Mattioli Woods despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Every company has risks, and we've spotted 2 warning signs for Mattioli Woods you should know about.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
