It looks like Moelis & Company (NYSE:MC) is about to go ex-dividend in the next 4 days. You can purchase shares before the 7th of August in order to receive the dividend, which the company will pay on the 30th of September.
Moelis’s next dividend payment will be US$0.26 per share. Last year, in total, the company distributed US$1.77 to shareholders. Looking at the last 12 months of distributions, Moelis has a trailing yield of approximately 5.9% on its current stock price of $29.79. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it’s growing.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable – hardly an ideal situation. Moelis paid out 103% of its earnings, which is more than we’re comfortable with, unless there are mitigating circumstances.
When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we’re encouraged by the steady growth at Moelis, with earnings per share up 7.3% on average over the last five years.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. In the past six years, Moelis has increased its dividend at approximately 14% a year on average. It’s encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
To Sum It Up
Should investors buy Moelis for the upcoming dividend? While we like that its earnings are growing somewhat, we’re not enamored that it’s paying out 103% of last year’s earnings. This is not an overtly appealing combination of characteristics, and we’re just not that interested in this company’s dividend.
With that being said, if you’re still considering Moelis as an investment, you’ll find it beneficial to know what risks this stock is facing. Every company has risks, and we’ve spotted 6 warning signs for Moelis you should know about.
We wouldn’t recommend just buying the first dividend stock you see, though. Here’s a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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This article by Simply Wall St is general in nature. 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.
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