Mensch und Maschine Software SE (ETR:MUM) Is About To Go Ex-Dividend, And It Pays A 2.2% Yield

By
Simply Wall St
Published
May 08, 2022
XTRA:MUM
Source: Shutterstock

Mensch und Maschine Software SE (ETR:MUM) stock is about to trade ex-dividend in 3 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Accordingly, Mensch und Maschine Software investors that purchase the stock on or after the 12th of May will not receive the dividend, which will be paid on the 9th of June.

The company's upcoming dividend is €1.20 a share, following on from the last 12 months, when the company distributed a total of €1.20 per share to shareholders. Looking at the last 12 months of distributions, Mensch und Maschine Software has a trailing yield of approximately 2.2% on its current stock price of €54.5. If you buy this business for its dividend, you should have an idea of whether Mensch und Maschine Software's dividend is reliable and sustainable. As a result, readers should always check whether Mensch und Maschine Software has been able to grow its dividends, or if the dividend might be cut.

View our latest analysis for Mensch und Maschine Software

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. It paid out 88% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. It could become a concern if earnings started to decline. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It paid out more than half (63%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Mensch und Maschine Software'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 how much of its profit Mensch und Maschine Software paid out over the last 12 months.

historic-dividend
XTRA:MUM Historic Dividend May 8th 2022

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 fall far enough, the company could be forced to cut its dividend. It's encouraging to see Mensch und Maschine Software has grown its earnings rapidly, up 27% a year for the past five years. Earnings per share are growing at a rapid rate, yet the company is paying out more than three-quarters of its earnings.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Mensch und Maschine Software has delivered 28% dividend growth per year on average over the past 10 years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

From a dividend perspective, should investors buy or avoid Mensch und Maschine Software? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. However, we'd also note that Mensch und Maschine Software is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

Want to learn more about Mensch und Maschine Software's dividend performance? Check out this visualisation of its historical revenue and earnings growth.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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