We Wouldn't Be Too Quick To Buy Mesa Royalty Trust (NYSE:MTR) Before It Goes Ex-Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Mesa Royalty Trust (NYSE:MTR) is about to go ex-dividend in just four days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled 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. In other words, investors can purchase Mesa Royalty Trust's shares before the 27th of April in order to be eligible for the dividend, which will be paid on the 31st of July.
The company's next dividend payment will be US$0.24 per share. Last year, in total, the company distributed US$1.97 to shareholders. Calculating the last year's worth of payments shows that Mesa Royalty Trust has a trailing yield of 9.8% on the current share price of $20.65. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
Check out our latest analysis for Mesa Royalty Trust
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Mesa Royalty Trust paid out 100% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances.
Click here to see how much of its profit Mesa Royalty Trust paid out over the last 12 months.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Mesa Royalty Trust earnings per share are up 4.6% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Mesa Royalty Trust has delivered 4.0% dividend growth per year on average over the past 10 years. 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.
To Sum It Up
Has Mesa Royalty Trust got what it takes to maintain its dividend payments? Mesa Royalty Trust has been growing earnings per share at a reasonable rate, but over the last year its dividend was not well covered by earnings. Mesa Royalty Trust doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.
With that in mind though, if the poor dividend characteristics of Mesa Royalty Trust don't faze you, it's worth being mindful of the risks involved with this business. Every company has risks, and we've spotted 4 warning signs for Mesa Royalty Trust (of which 1 is a bit unpleasant!) you should know about.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
