Is It Smart To Buy Manulife Financial Corporation (TSE:MFC) Before It Goes Ex-Dividend?

Manulife Financial Corporation (TSE:MFC) stock is about to trade ex-dividend in three days. You will need to purchase shares before the 22nd of February to receive the dividend, which will be paid on the 19th of March.

Manulife Financial's upcoming dividend is CA$0.28 a share, following on from the last 12 months, when the company distributed a total of CA$1.12 per share to shareholders. Based on the last year's worth of payments, Manulife Financial has a trailing yield of 4.5% on the current stock price of CA$25.08. If you buy this business for its dividend, you should have an idea of whether Manulife Financial's dividend is reliable and sustainable. As a result, readers should always check whether Manulife Financial has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Manulife Financial

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. That's why it's good to see Manulife Financial paying out a modest 38% of its earnings.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Manulife Financial has grown its earnings rapidly, up 23% a year for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, 10 years ago, Manulife Financial has lifted its dividend by approximately 8.0% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

From a dividend perspective, should investors buy or avoid Manulife Financial? Companies like Manulife Financial that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Manulife Financial ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, we've found 1 warning sign for Manulife Financial that we recommend you consider before investing in the business.

If you're in the market for dividend stocks, we recommend checking our list of top 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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