We Wouldn't Be Too Quick To Buy Mannatech, Incorporated (NASDAQ:MTEX) Before It Goes Ex-Dividend
Mannatech, Incorporated (NASDAQ:MTEX) stock is about to trade ex-dividend in 4 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Mannatech's shares on or after the 14th of June, you won't be eligible to receive the dividend, when it is paid on the 29th of June.
The company's upcoming dividend is US$0.20 a share, following on from the last 12 months, when the company distributed a total of US$0.80 per share to shareholders. Looking at the last 12 months of distributions, Mannatech has a trailing yield of approximately 6.4% on its current stock price of $12.5. If you buy this business for its dividend, you should have an idea of whether Mannatech's dividend is reliable and sustainable. As a result, readers should always check whether Mannatech has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Mannatech
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. Mannatech reported a loss last year, so it's not great to see that it has continued paying a dividend. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Mannatech didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term.
Click here to see how much of its profit Mannatech paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. Mannatech 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.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Mannatech has delivered an average of 6.9% per year annual increase in its dividend, based on the past seven years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Remember, you can always get a snapshot of Mannatech's financial health, by checking our visualisation of its financial health, here.
To Sum It Up
Is Mannatech an attractive dividend stock, or better left on the shelf? It's hard to get used to Mannatech paying a dividend despite reporting a loss over the past year. Worse, the dividend was not well covered by cash flow. Bottom line: Mannatech has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.
With that in mind though, if the poor dividend characteristics of Mannatech don't faze you, it's worth being mindful of the risks involved with this business. Be aware that Mannatech is showing 2 warning signs in our investment analysis, and 1 of those can't be ignored...
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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