Momentum Group Limited (JSE:MTM) Looks Like A Good Stock, And It's Going Ex-Dividend Soon
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 Momentum Group Limited (JSE:MTM) is about to go ex-dividend in just four days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Accordingly, Momentum Group investors that purchase the stock on or after the 7th of October will not receive the dividend, which will be paid on the 12th of October.
The company's upcoming dividend is R01.20 a share, following on from the last 12 months, when the company distributed a total of R2.40 per share to shareholders. Calculating the last year's worth of payments shows that Momentum Group has a trailing yield of 6.5% on the current share price of R037.08. If you buy this business for its dividend, you should have an idea of whether Momentum Group's dividend is reliable and sustainable. So we need to investigate whether Momentum Group 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. That's why it's good to see Momentum Group paying out a modest 45% of its earnings.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
View our latest analysis for Momentum Group
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. It's encouraging to see Momentum Group has grown its earnings rapidly, up 76% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Momentum Group has delivered an average of 4.3% per year annual increase in its dividend, based on the past 10 years of dividend payments. Earnings per share have been growing much quicker than dividends, potentially because Momentum Group is keeping back more of its profits to grow the business.
Final Takeaway
Is Momentum Group an attractive dividend stock, or better left on the shelf? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. Momentum Group ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
While it's tempting to invest in Momentum Group for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 1 warning sign for Momentum Group 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.