If you are interested in cashing in on Mackinac Financial Corporation’s (NASDAQ:MFNC) upcoming dividend of US$0.12 per share, you only have 4 days left to buy the shares before its ex-dividend date, 26 September 2018, in time for dividends payable on the 08 October 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Mackinac Financial’s latest financial data to analyse its dividend attributes.
5 checks you should do on a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share risen in the past couple of years?
- Can it afford to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Mackinac Financial fit our criteria?
The company currently pays out 79.9% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. In the near future, analysts are predicting lower payout ratio of 38.7%, leading to a dividend yield of 3.2%. However, EPS should increase to $1.08, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider Mackinac Financial as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Mackinac Financial produces a yield of 2.9%, which is high for Banks stocks but still below the market’s top dividend payers.
If Mackinac Financial is in your portfolio for cash-generating reasons, there may be better alternatives out there. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three essential aspects you should look at:
- Future Outlook: What are well-informed industry analysts predicting for MFNC’s future growth? Take a look at our free research report of analyst consensus for MFNC’s outlook.
- Valuation: What is MFNC worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether MFNC is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.