Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Miller Industries, Inc. (NYSE:MLR) is about to go ex-dividend in just 4 days. You can purchase shares before the 6th of September in order to receive the dividend, which the company will pay on the 16th of September.
Miller Industries's upcoming dividend is US$0.18 a share, following on from the last 12 months, when the company distributed a total of US$0.72 per share to shareholders. Calculating the last year's worth of payments shows that Miller Industries has a trailing yield of 2.3% on the current share price of $31.29. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. 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. Miller Industries is paying out just 21% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. 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. Dividends consumed 70% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
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.
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. It's encouraging to see Miller Industries has grown its earnings rapidly, up 33% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Miller Industries has delivered 25% dividend growth per year on average over the past 9 years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
From a dividend perspective, should investors buy or avoid Miller Industries? Earnings per share have grown at a nice rate in recent times and over the last year, Miller Industries paid out less than half its earnings and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.
Want to learn more about Miller Industries? Here's a visualisation of its historical rate of 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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