Methanex Corporation (TSE:MX) Is About To Go Ex-Dividend, And It Pays A 1.9% Yield
Methanex Corporation (TSE:MX) is about to trade ex-dividend in the next four 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase Methanex's shares before the 15th of December in order to be eligible for the dividend, which will be paid on the 31st of December.
The company's next dividend payment will be US$0.17 per share. Last year, in total, the company distributed US$0.70 to shareholders. Based on the last year's worth of payments, Methanex has a trailing yield of 1.9% on the current stock price of CA$50.07. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! 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 Methanex
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. Methanex has a low and conservative payout ratio of just 8.1% of its income after tax. A useful secondary check can be to evaluate whether Methanex generated enough free cash flow to afford its dividend. What's good is that dividends were well covered by free cash flow, with the company paying out 7.4% of its cash flow last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're not enthused to see that Methanex's earnings per share have remained effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Methanex's dividend payments are broadly unchanged compared to where they were 10 years ago.
The Bottom Line
Should investors buy Methanex for the upcoming dividend? Earnings per share have been flat, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend gets cut. Overall, it's hard to get excited about Methanex from a dividend perspective.
On that note, you'll want to research what risks Methanex is facing. Be aware that Methanex is showing 3 warning signs in our investment analysis, and 1 of those is concerning...
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.
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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.
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