Mullen Group Ltd. (TSE:MTL) Looks Interesting, And It's About To Pay A Dividend
It looks like Mullen Group Ltd. (TSE:MTL) is about to go ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Mullen Group's shares on or after the 29th of June will not receive the dividend, which will be paid on the 15th of July.
The company's upcoming dividend is CA$0.06 a share, following on from the last 12 months, when the company distributed a total of CA$0.60 per share to shareholders. Last year's total dividend payments show that Mullen Group has a trailing yield of 6.2% on the current share price of CA$11.55. 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 Mullen Group has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Mullen 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. Mullen Group paid out 64% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 45% of its free cash flow in the past year.
It's positive to see that Mullen 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 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Mullen Group earnings per share are up 9.2% per annum over the last five years. Decent historical earnings per share growth suggests Mullen Group has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Mullen Group's dividend payments per share have declined at 3.2% per year on average over the past 10 years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
The Bottom Line
Is Mullen Group an attractive dividend stock, or better left on the shelf? While earnings per share growth has been modest, Mullen Group's dividend payouts are around an average level; without a sharp change in earnings we feel that the dividend is likely somewhat sustainable. Pleasingly the company paid out a conservatively low percentage of its free cash flow. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Mullen Group's dividend merits.
So while Mullen 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 3 warning signs for Mullen Group that we recommend you consider before investing in the business.
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.
