Why You Might Be Interested In Miquel y Costas & Miquel, S.A. (BME:MCM) For Its Upcoming Dividend

Miquel y Costas & Miquel, S.A. (BME:MCM) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day 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 takes at least two business day to settle. In other words, investors can purchase Miquel y Costas & Miquel's shares before the 16th of April in order to be eligible for the dividend, which will be paid on the 18th of April.

The company's upcoming dividend is €0.0891 a share, following on from the last 12 months, when the company distributed a total of €0.44 per share to shareholders. Based on the last year's worth of payments, Miquel y Costas & Miquel has a trailing yield of 3.6% on the current stock price of €12.00. If you buy this business for its dividend, you should have an idea of whether Miquel y Costas & Miquel's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Miquel y Costas & Miquel

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Fortunately Miquel y Costas & Miquel's payout ratio is modest, at just 29% of profit. A useful secondary check can be to evaluate whether Miquel y Costas & Miquel generated enough free cash flow to afford its dividend. It distributed 32% of its free cash flow as dividends, a comfortable payout level for most companies.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Miquel y Costas & Miquel paid out over the last 12 months.

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 earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Miquel y Costas & Miquel, with earnings per share up 4.8% on average over the last five years. Earnings per share growth in recent times has not been a standout. Yet there are several ways to grow the dividend, and one of them is simply that the company may choose to pay out more of its earnings as dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Miquel y Costas & Miquel has delivered an average of 16% per year annual increase in its dividend, based on the past 10 years of dividend payments. 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.

Final Takeaway

Has Miquel y Costas & Miquel got what it takes to maintain its dividend payments? Earnings per share growth has been growing somewhat, and Miquel y Costas & Miquel is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Miquel y Costas & Miquel is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Miquel y Costas & Miquel, and we would prioritise taking a closer look at it.

So while Miquel y Costas & Miquel looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. We've identified 2 warning signs with Miquel y Costas & Miquel (at least 1 which is a bit concerning), and understanding these should be part of your investment process.

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.