We Wouldn't Be Too Quick To Buy Monash IVF Group Limited (ASX:MVF) Before It Goes Ex-Dividend

Monash IVF Group Limited (ASX:MVF) stock is about to trade ex-dividend in 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 of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase Monash IVF Group's shares before the 5th of September to receive the dividend, which will be paid on the 11th of October.

The company's next dividend payment will be AU$0.025 per share, and in the last 12 months, the company paid a total of AU$0.05 per share. Calculating the last year's worth of payments shows that Monash IVF Group has a trailing yield of 4.1% on the current share price of AU$1.205. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Monash IVF Group can afford its dividend, and if the dividend could grow.

See our latest analysis for Monash IVF Group

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. Monash IVF Group reported a loss last year, so it's not great to see that it has continued paying a dividend. With the recent loss, it's important to check if the business generated enough cash to pay its 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. It paid out more than half (59%) of its free cash flow in the past year, which is within an average range for most companies.

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 fall far enough, the company could be forced to cut its dividend. 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Monash IVF Group has seen its dividend decline 2.6% per annum on average over the past 10 years, which is not great to see. 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.

Get our latest analysis on Monash IVF Group's balance sheet health here.

To Sum It Up

Is Monash IVF Group an attractive dividend stock, or better left on the shelf? 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.

So if you're still interested in Monash IVF Group despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example - Monash IVF Group has 1 warning sign we think 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.

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

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.