Mullen Group Ltd. (TSE:MTL) Goes Ex-Dividend Soon

It looks like Mullen Group Ltd. (TSE:MTL) is about to go ex-dividend in the next two days. This means that investors who purchase shares on or after the 28th of January will not receive the dividend, which will be paid on the 16th of February.

Mullen Group's next dividend payment will be CA$0.04 per share. Last year, in total, the company distributed CA$0.36 to shareholders. Last year's total dividend payments show that Mullen Group has a trailing yield of 3.3% on the current share price of CA$10.77. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Mullen Group

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. Mullen Group paid out more than half (64%) of its earnings last year, which is a regular payout ratio for most companies. A useful secondary check can be to evaluate whether Mullen Group generated enough free cash flow to afford its dividend. It distributed 26% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Mullen Group'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.

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Mullen Group's earnings per share have dropped 10% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Mullen Group has seen its dividend decline 3.2% per annum on average over the past 10 years, which is not great to see. 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.

The Bottom Line

Should investors buy Mullen Group for the upcoming dividend? The payout ratios are within a reasonable range, implying the dividend may be sustainable. Declining earnings are a serious concern, however, and could pose a threat to the dividend in future. While it does have some good things going for it, we're a bit ambivalent and it would take more to convince us of Mullen Group's dividend merits.

If you want to look further into Mullen Group, it's worth knowing the risks this business faces. For example, Mullen Group has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about.

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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