Interested In Mueller Water Products' (NYSE:MWA) Upcoming US$0.061 Dividend? You Have Three Days Left
It looks like Mueller Water Products, Inc. (NYSE:MWA) is about to go ex-dividend in the next three 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 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. Meaning, you will need to purchase Mueller Water Products' shares before the 9th of August to receive the dividend, which will be paid on the 21st of August.
The company's next dividend payment will be US$0.061 per share, on the back of last year when the company paid a total of US$0.24 to shareholders. Based on the last year's worth of payments, Mueller Water Products has a trailing yield of 1.7% on the current stock price of $14.19. If you buy this business for its dividend, you should have an idea of whether Mueller Water Products's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for Mueller Water Products
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. Mueller Water Products paid out a comfortable 50% of its profit last year. A useful secondary check can be to evaluate whether Mueller Water Products generated enough free cash flow to afford its dividend. Mueller Water Products paid out more free cash flow than it generated - 111%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.
While Mueller Water Products's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Mueller Water Products to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Mueller Water Products earnings per share are up 7.3% per annum over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Mueller Water Products has increased its dividend at approximately 13% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
The Bottom Line
Should investors buy Mueller Water Products for the upcoming dividend? Mueller Water Products delivered reasonable earnings per share growth in recent times, and paid out less than half its profits and 111% of its cash flow over the last year, which is a mediocre outcome. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
However if you're still interested in Mueller Water Products as a potential investment, you should definitely consider some of the risks involved with Mueller Water Products. Our analysis shows 2 warning signs for Mueller Water Products that we strongly recommend you have a look at before investing in the company.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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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.
