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Read This Before Considering Maverix Metals Inc. (TSE:MMX) For Its Upcoming US$0.01 Dividend

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Maverix Metals Inc. (TSE:MMX) stock is about to trade ex-dividend in four days. This means that investors who purchase shares on or after the 28th of August will not receive the dividend, which will be paid on the 15th of September.

Maverix Metals's next dividend payment will be CA$0.01 per share. Last year, in total, the company distributed CA$0.04 to shareholders. Based on the last year's worth of payments, Maverix Metals has a trailing yield of 0.9% on the current stock price of CA$5.7. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Maverix Metals

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Maverix Metals reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Maverix Metals paid a dividend despite reporting negative free cash flow last year. That's typically a bad combination and - if this were more than a one-off - not sustainable.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. Maverix Metals reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Unfortunately Maverix Metals has only been paying a dividend for a year or so, so there's not much of a history to draw insight from.

Get our latest analysis on Maverix Metals's balance sheet health here.

Final Takeaway

From a dividend perspective, should investors buy or avoid Maverix Metals? First, it's not great to see the company paying a dividend despite being loss-making over the last year. Second, the dividend was not well covered by cash flow." It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Maverix Metals. Our analysis shows 2 warning signs for Maverix Metals and you should be aware of them before buying any shares.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.