Three Days Left Until Melcor Developments Ltd. (TSE:MRD) Trades Ex-Dividend
It looks like Melcor Developments Ltd. (TSE:MRD) is about to go ex-dividend in the next 3 days. Investors can purchase shares before the 14th of December in order to be eligible for this dividend, which will be paid on the 31st of December.
Melcor Developments's upcoming dividend is CA$0.08 a share, following on from the last 12 months, when the company distributed a total of CA$0.32 per share to shareholders. Based on the last year's worth of payments, Melcor Developments stock has a trailing yield of around 4.0% on the current share price of CA$8.07. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Melcor Developments has been able to grow its dividends, or if the dividend might be cut.
View our latest analysis for Melcor Developments
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Melcor Developments's payout ratio is modest, at just 44% of profit. A useful secondary check can be to evaluate whether Melcor Developments generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 29% 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 how much of its profit Melcor Developments paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. 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 discomforted by Melcor Developments's 23% per annum decline in earnings in the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Melcor Developments has lifted its dividend by approximately 0.6% a year on average.
The Bottom Line
Is Melcor Developments an attractive dividend stock, or better left on the shelf? Melcor Developments has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall, it's hard to get excited about Melcor Developments from a dividend perspective.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Be aware that Melcor Developments is showing 6 warning signs in our investment analysis, and 2 of those are concerning...
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.
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.
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