Three Days Left To Buy MaxiPARTS Limited (ASX:MXI) Before The Ex-Dividend Date
Readers hoping to buy MaxiPARTS Limited (ASX:MXI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase MaxiPARTS' shares before the 28th of February to receive the dividend, which will be paid on the 26th of March.
The company's next dividend payment will be AU$0.0257 per share, on the back of last year when the company paid a total of AU$0.064 to shareholders. Last year's total dividend payments show that MaxiPARTS has a trailing yield of 2.7% on the current share price of AU$2.40. 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.
View our latest analysis for MaxiPARTS
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. Fortunately MaxiPARTS's payout ratio is modest, at just 50% of profit. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 30% of the free cash flow it generated, which is a comfortable payout ratio.
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.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. MaxiPARTS's earnings per share have fallen at approximately 16% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
We'd also point out that MaxiPARTS issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. MaxiPARTS's dividend payments per share have declined at 17% per year on average over the past 10 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
Final Takeaway
Is MaxiPARTS worth buying for its dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of MaxiPARTS's dividend merits.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. To help with this, we've discovered 3 warning signs for MaxiPARTS that you should be aware of before investing in their shares.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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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.
