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My Food Bag Group Limited (NZSE:MFB) Passed Our Checks, And It's About To Pay A NZ$0.04 Dividend

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It looks like My Food Bag Group Limited (NZSE:MFB) is about to go ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Thus, you can purchase My Food Bag Group's shares before the 31st of May in order to receive the dividend, which the company will pay on the 16th of June.

The company's next dividend payment will be NZ$0.04 per share, and in the last 12 months, the company paid a total of NZ$0.08 per share. Last year's total dividend payments show that My Food Bag Group has a trailing yield of 9.0% on the current share price of NZ$0.89. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for My Food Bag Group

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. Its dividend payout ratio is 85% 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. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. It distributed 27% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that My Food Bag Group's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see how much of its profit My Food Bag Group paid out over the last 12 months.


Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see My Food Bag Group's earnings have been skyrocketing, up 27% per annum for the past five years. Earnings per share are growing at a rapid rate, yet the company is paying out more than three-quarters of its earnings.

Unfortunately My Food Bag Group has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

The Bottom Line

Has My Food Bag Group got what it takes to maintain its dividend payments? My Food Bag Group's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. My Food Bag Group looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

So while My Food Bag Group looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 1 warning sign for My Food Bag Group that we recommend you consider before investing in the business.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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.