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Readers hoping to buy Moneysupermarket.com Group PLC (LON:MONY) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. If you purchase the stock on or after the 2nd of April, you won't be eligible to receive this dividend, when it is paid on the 14th of May.
Moneysupermarket.com Group's next dividend payment will be UK£0.086 per share. Last year, in total, the company distributed UK£0.12 to shareholders. Based on the last year's worth of payments, Moneysupermarket.com Group has a trailing yield of 4.1% on the current stock price of £2.871. If you buy this business for its dividend, you should have an idea of whether Moneysupermarket.com Group's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Moneysupermarket.com Group is paying out an acceptable 66% of its profit, a common payout level among most companies. A useful secondary check can be to evaluate whether Moneysupermarket.com Group generated enough free cash flow to afford its dividend. Over the last year it paid out 61% of its free cash flow as dividends, within the usual range for most companies.
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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. For this reason, we're glad to see Moneysupermarket.com Group's earnings per share have risen 13% per annum over the last five years. Moneysupermarket.com Group has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of further dividend increases in the future.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past ten years, Moneysupermarket.com Group has increased its dividend at approximately 13% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
The Bottom Line
Is Moneysupermarket.com Group an attractive dividend stock, or better left on the shelf? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. That's why we're glad to see Moneysupermarket.com Group's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 66% and 61% respectively. In summary, it's hard to get excited about Moneysupermarket.com Group from a dividend perspective.
So while Moneysupermarket.com 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 Moneysupermarket.com Group that we recommend you consider before investing in the business.
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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