Three Days Left To Buy Macy's, Inc. (NYSE:M) Before The Ex-Dividend Date
Macy's, Inc. (NYSE:M) stock is about to trade ex-dividend in three 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. In other words, investors can purchase Macy's' shares before the 15th of September in order to be eligible for the dividend, which will be paid on the 1st of October.
The company's next dividend payment will be US$0.1915 per share. Last year, in total, the company distributed US$0.77 to shareholders. Calculating the last year's worth of payments shows that Macy's has a trailing yield of 3.7% on the current share price of US$20.50. 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 investigate whether Macy's can afford its dividend, and if the dividend could grow.
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. Macy's paid out a comfortable 30% of its profit last year. A useful secondary check can be to evaluate whether Macy's generated enough free cash flow to afford its dividend. The good news is it paid out just 19% of its free cash flow in the last year.
It's positive to see that Macy's's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
View our latest analysis for Macy's
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 earnings fall far enough, the company could be forced to cut its dividend. Macy's's earnings per share have fallen at approximately 23% a year over the previous five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Macy's's dividend payments per share have declined at 6.1% per year on average over the past 10 years, which is uninspiring. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
Final Takeaway
From a dividend perspective, should investors buy or avoid Macy's? Macy's has comfortably low cash and profit payout ratios, which may mean the dividend is sustainable even in the face of a sharp decline in earnings per share. Still, we consider declining earnings to be a warning sign. Overall, it's hard to get excited about Macy's from a dividend perspective.
In light of that, while Macy's has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 1 warning sign for Macy's 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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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.