MGIC Investment Corporation (NYSE:MTG) stock is about to trade ex-dividend in 3 days time. If you purchase the stock on or after the 29th of August, you won't be eligible to receive this dividend, when it is paid on the 20th of September.
MGIC Investment's next dividend payment will be US$0.06 per share, on the back of last year when the company paid a total of US$0.24 to shareholders. Last year's total dividend payments show that MGIC Investment has a trailing yield of 1.9% on the current share price of $12.31. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
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. With that in mind, we're encouraged by the steady growth at MGIC Investment, with earnings per share up 2.9% on average over the last five years.
This is MGIC Investment's first year of paying a dividend, so it doesn't have much of a history yet to compare to.
The Bottom Line
Should investors buy MGIC Investment for the upcoming dividend? It has been growing its earnings per share somewhat in recent years, although it reinvests more than half its earnings in the business, which could suggest there are some growth projects that have not yet reached fruition. We think this is a pretty attractive combination, and would be interested in investigating MGIC Investment more closely.
Ever wonder what the future holds for MGIC Investment? See what the nine analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
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.
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