Why You Might Be Interested In Magyar Bancorp, Inc. (NASDAQ:MGYR) For Its Upcoming Dividend
It looks like Magyar Bancorp, Inc. (NASDAQ:MGYR) is about to go ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Magyar Bancorp investors that purchase the stock on or after the 3rd of May will not receive the dividend, which will be paid on the 18th of May.
The company's next dividend payment will be US$0.03 per share, and in the last 12 months, the company paid a total of US$0.20 per share. Based on the last year's worth of payments, Magyar Bancorp has a trailing yield of 2.0% on the current stock price of $10.25. If you buy this business for its dividend, you should have an idea of whether Magyar Bancorp's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Magyar Bancorp
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Magyar Bancorp is paying out just 9.8% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.
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.
Click here to see how much of its profit Magyar Bancorp paid out over the last 12 months.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Magyar Bancorp's earnings have been skyrocketing, up 43% per annum for the past five years.
Given that Magyar Bancorp has only been paying a dividend for a year, there's not much of a past history to draw insight from.
The Bottom Line
Should investors buy Magyar Bancorp for the upcoming dividend? Companies like Magyar Bancorp that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Magyar Bancorp ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
So while Magyar Bancorp looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Case in point: We've spotted 2 warning signs for Magyar Bancorp you should be aware of.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
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