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Interested In McBride's (LON:MCB) Upcoming UK£0.031 Dividend? You Have Three Days Left
McBride plc (LON:MCB) stock is about to trade ex-dividend in 3 days. The ex-dividend date is two business days before a company's record date in most cases, 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. Accordingly, McBride investors that purchase the stock on or after the 29th of October will not receive the dividend, which will be paid on the 27th of November.
The company's next dividend payment will be UK£0.031 per share. Last year, in total, the company distributed UK£0.031 to shareholders. Calculating the last year's worth of payments shows that McBride has a trailing yield of 1.7% on the current share price of UK£1.802. If you buy this business for its dividend, you should have an idea of whether McBride's dividend is reliable and sustainable. So we need to investigate whether McBride can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. McBride has a low and conservative payout ratio of just 18% of its income after tax. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year, it paid out dividends equivalent to 236% of what it generated in free cash flow, a disturbingly high percentage. Unless there were something in the business we're not grasping, this could signal a risk that the dividend may have to be cut in the future.
McBride paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were McBride to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.
View our latest analysis for McBride
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see McBride's earnings per share have risen 17% per annum over the last five years. Earnings have been growing at a decent rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. McBride's dividend payments per share have declined at 1.5% per year on average over the past 10 years, which is uninspiring.
To Sum It Up
Has McBride got what it takes to maintain its dividend payments? We're glad to see the company has been improving its earnings per share while also paying out a low percentage of income. However, it's not great to see it paying out what we see as an uncomfortably high percentage of its cash flow. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.
In light of that, while McBride has an appealing dividend, it's worth knowing the risks involved with this stock. For instance, we've identified 2 warning signs for McBride (1 can't be ignored) you should be aware of.
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.
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