Should Income Investors Look At Mayfield Group Holdings Limited (ASX:MYG) Before Its Ex-Dividend?

It looks like Mayfield Group Holdings Limited (ASX:MYG) is about to go ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order 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. Therefore, if you purchase Mayfield Group Holdings' shares on or after the 7th of August, you won't be eligible to receive the dividend, when it is paid on the 22nd of August.

The company's upcoming dividend is AU$0.02 a share, following on from the last 12 months, when the company distributed a total of AU$0.02 per share to shareholders. Calculating the last year's worth of payments shows that Mayfield Group Holdings has a trailing yield of 2.4% on the current share price of AU$0.83. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for Mayfield Group Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Mayfield Group Holdings's payout ratio is modest, at just 25% of profit. A useful secondary check can be to evaluate whether Mayfield Group Holdings generated enough free cash flow to afford its dividend. It paid out 14% of its free cash flow as dividends last year, which is conservatively low.

It's positive to see that Mayfield Group Holdings'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.

Click here to see how much of its profit Mayfield Group Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Mayfield Group Holdings's earnings have collapsed faster than Wile E Coyote's schemes to trap the Road Runner; down a tremendous 75% a year over the past five years.

Given that Mayfield Group Holdings has only been paying a dividend for a year, there's not much of a past history to draw insight from.

To Sum It Up

Is Mayfield Group Holdings worth buying for its dividend? Earnings per share are down meaningfully, although at least the company is paying out a low and conservative percentage of both its earnings and cash flow. It's definitely not great to see earnings falling, but at least there may be some buffer before the dividend needs to be cut. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Mayfield Group Holdings's dividend merits.

On that note, you'll want to research what risks Mayfield Group Holdings is facing. For example, we've found 2 warning signs for Mayfield Group Holdings that we recommend you consider before investing in the business.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com