Dividend Investors: Don't Be Too Quick To Buy Mo-BRUK S.A. (WSE:MBR) For Its Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Mo-BRUK S.A. (WSE:MBR) is about to trade ex-dividend in the next 3 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Meaning, you will need to purchase Mo-BRUK's shares before the 29th of July to receive the dividend, which will be paid on the 5th of October.
The company's upcoming dividend is zł15.23 a share, following on from the last 12 months, when the company distributed a total of zł15.23 per share to shareholders. Based on the last year's worth of payments, Mo-BRUK has a trailing yield of 3.9% on the current stock price of zł389.50. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
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. An unusually high payout ratio of 292% of its profit suggests something is happening other than the usual distribution of profits to shareholders.
Check out our latest analysis for Mo-BRUK
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Readers will understand then, why we're concerned to see Mo-BRUK's earnings per share have dropped 25% a year over 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 past seven years, Mo-BRUK has increased its dividend at approximately 28% a year on average. The only way to pay higher dividends when earnings are shrinking is either to pay out a larger percentage of profits, spend cash from the balance sheet, or borrow the money. Mo-BRUK is already paying out a high percentage of its income, so without earnings growth, we're doubtful of whether this dividend will grow much in the future.
To Sum It Up
Should investors buy Mo-BRUK for the upcoming dividend? Earnings per share are in decline and Mo-BRUK is paying out what we feel is an uncomfortably high percentage of its profit as dividends. Generally we think dividend investors should avoid businesses in this situation, as high payout ratios and declining earnings can lead to the dividend being cut. These characteristics don't generally lead to outstanding dividend performance, and investors may not be happy with the results of owning this stock for its dividend.
With that in mind though, if the poor dividend characteristics of Mo-BRUK don't faze you, it's worth being mindful of the risks involved with this business. Every company has risks, and we've spotted 2 warning signs for Mo-BRUK you should know about.
If you're in the market for strong dividend payers, we recommend checking our selection of top 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.