Do These 3 Checks Before Buying Monash IVF Group Limited (ASX:MVF) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Monash IVF Group Limited (ASX:MVF) is about to trade ex-dividend in the next four days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Monash IVF Group's shares on or after the 6th of March, you won't be eligible to receive the dividend, when it is paid on the 11th of April.

The company's next dividend payment will be AU$0.026 per share, on the back of last year when the company paid a total of AU$0.05 to shareholders. Based on the last year's worth of payments, Monash IVF Group has a trailing yield of 4.1% on the current stock price of AU$1.225. If you buy this business for its dividend, you should have an idea of whether Monash IVF Group's dividend is reliable and sustainable. So we need to investigate whether Monash IVF Group can afford its dividend, and if the dividend could grow.

View our latest analysis for Monash IVF Group

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Monash IVF Group reported a loss last year, so it's not great to see that it has continued paying a dividend. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Monash IVF Group didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. Dividends consumed 59% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Monash IVF Group was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Monash IVF Group's dividend payments per share have declined at 2.6% 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.

We update our analysis on Monash IVF Group every 24 hours, so you can always get the latest insights on its financial health, here.

To Sum It Up

Has Monash IVF Group got what it takes to maintain its dividend payments? It's hard to get used to Monash IVF Group paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. It's not that we think Monash IVF Group is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

With that in mind though, if the poor dividend characteristics of Monash IVF Group don't faze you, it's worth being mindful of the risks involved with this business. Every company has risks, and we've spotted 1 warning sign for Monash IVF Group you should know about.

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.