Readers hoping to buy Maverix Metals Inc. (TSE:MMX) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Maverix Metals' shares on or after the 29th of November, you won't be eligible to receive the dividend, when it is paid on the 15th of December.
The company's upcoming dividend is US$0.013 a share, following on from the last 12 months, when the company distributed a total of US$0.05 per share to shareholders. Last year's total dividend payments show that Maverix Metals has a trailing yield of 1.1% on the current share price of CA$6.02. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Maverix Metals can afford its dividend, and if the dividend could grow.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Maverix Metals has a low and conservative payout ratio of just 24% of its income after tax. A useful secondary check can be to evaluate whether Maverix Metals generated enough free cash flow to afford its dividend. The good news is it paid out just 12% of its free cash flow in the last year.
It's positive to see that Maverix Metals's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. 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 Maverix Metals has grown its earnings rapidly, up 71% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, Maverix Metals looks like a promising growth company.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Maverix Metals has delivered 12% dividend growth per year on average over the past two years. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
The Bottom Line
Is Maverix Metals an attractive dividend stock, or better left on the shelf? We love that Maverix Metals is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. These characteristics suggest the company is reinvesting in growing its business, while the conservative payout ratio also implies a reduced risk of the dividend being cut in the future. Overall we think this is an attractive combination and worthy of further research.
So while Maverix Metals looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For instance, we've identified 3 warning signs for Maverix Metals (1 is significant) you should be aware of.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
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.
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