We Wouldn't Be Too Quick To Buy Madison Pacific Properties Inc. (TSE:MPC) Before It Goes Ex-Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Madison Pacific Properties Inc. (TSE:MPC) is about to trade ex-dividend in the next two days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. 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. Thus, you can purchase Madison Pacific Properties' shares before the 5th of February in order to receive the dividend, which the company will pay on the 21st of February.

The company's next dividend payment will be CA$0.0525 per share, and in the last 12 months, the company paid a total of CA$0.10 per share. Last year's total dividend payments show that Madison Pacific Properties has a trailing yield of 1.5% on the current share price of CA$6.84. If you buy this business for its dividend, you should have an idea of whether Madison Pacific Properties's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Madison Pacific Properties

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. Madison Pacific Properties's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. It paid out 83% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

Click here to see how much of its profit Madison Pacific Properties paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Madison Pacific Properties reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Madison Pacific Properties's dividend payments are broadly unchanged compared to where they were 10 years ago.

We update our analysis on Madison Pacific Properties every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Is Madison Pacific Properties worth buying for its dividend? It's hard to get used to Madison Pacific Properties paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Bottom line: Madison Pacific Properties has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

With that in mind though, if the poor dividend characteristics of Madison Pacific Properties don't faze you, it's worth being mindful of the risks involved with this business. For example, we've found 3 warning signs for Madison Pacific Properties that we recommend you consider before investing in the business.

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.

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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.