Read This Before Considering MRV Engenharia e Participações S.A. (BVMF:MRVE3) For Its Upcoming R$0.21 Dividend

MRV Engenharia e Participações S.A. (BVMF:MRVE3) is about to trade ex-dividend in the next day or two. You will need to purchase shares before the 19th of January to receive the dividend, which will be paid on the 28th of January.

MRV Engenharia e Participações's next dividend payment will be R$0.21 per share. Last year, in total, the company distributed R$0.37 to shareholders. Last year's total dividend payments show that MRV Engenharia e Participações has a trailing yield of 1.8% on the current share price of R$20.3. 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 MRV Engenharia e Participações

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. MRV Engenharia e Participações paid out a comfortable 34% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out 0.0002% of its free cash flow as dividends last year, which is conservatively low.

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 the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Readers will understand then, why we're concerned to see MRV Engenharia e Participações's earnings per share have dropped 7.3% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. MRV Engenharia e Participações has delivered an average of 8.0% per year annual increase in its dividend, based on the past 10 years of dividend payments.

To Sum It Up

Is MRV Engenharia e Participações an attractive dividend stock, or better left on the shelf? 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. Overall, it's hard to get excited about MRV Engenharia e Participações from a dividend perspective.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For instance, we've identified 4 warning signs for MRV Engenharia e Participações (1 shouldn't be ignored) you should be aware of.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising 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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