Here's Why We're Wary Of Buying Mackenzie Master Limited Partnership's (TSE:MKZ.UN) For Its Upcoming Dividend

Readers hoping to buy Mackenzie Master Limited Partnership (TSE:MKZ.UN) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 30th of December in order to be eligible for this dividend, which will be paid on the 22nd of January.

Mackenzie Master Limited Partnership's upcoming dividend is CA$0.086 a share, following on from the last 12 months, when the company distributed a total of CA$0.086 per share to shareholders. Based on the last year's worth of payments, Mackenzie Master Limited Partnership stock has a trailing yield of around 8.9% on the current share price of CA$0.97. 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 Mackenzie Master Limited Partnership can afford its dividend, and if the dividend could grow.

View our latest analysis for Mackenzie Master Limited Partnership

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Mackenzie Master Limited Partnership paid out 116% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance.

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.

Click here to see how much of its profit Mackenzie Master Limited Partnership paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with falling earnings are riskier for dividend shareholders. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're discomforted by Mackenzie Master Limited Partnership's 12% per annum decline in earnings in the past five years. When earnings per share fall, the maximum amount of dividends that can be paid also falls.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Mackenzie Master Limited Partnership's dividend payments per share have declined at 14% 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.

Final Takeaway

Is Mackenzie Master Limited Partnership an attractive dividend stock, or better left on the shelf? Earnings per share are in decline and Mackenzie Master Limited Partnership is paying out what we feel is an uncomfortably high percentage of its profit as dividends. It's not that we hate the business, but we feel that these characeristics are not desirable for investors seeking a reliable dividend stock to own for the long term. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

So if you're still interested in Mackenzie Master Limited Partnership despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Be aware that Mackenzie Master Limited Partnership is showing 4 warning signs in our investment analysis, and 3 of those are a bit concerning...

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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