Is It Smart To Buy Miquel y Costas & Miquel, S.A. (BME:MCM) Before It Goes Ex-Dividend?

Simply Wall St
July 04, 2021
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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Miquel y Costas & Miquel, S.A. (BME:MCM) is about to go ex-dividend in just 3 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 Miquel y Costas & Miquel's shares before the 9th of July in order to receive the dividend, which the company will pay on the 13th of July.

The company's next dividend payment will be €0.10 per share, and in the last 12 months, the company paid a total of €0.25 per share. Looking at the last 12 months of distributions, Miquel y Costas & Miquel has a trailing yield of approximately 1.5% on its current stock price of €16.12. If you buy this business for its dividend, you should have an idea of whether Miquel y Costas & Miquel's dividend is reliable and sustainable. As a result, readers should always check whether Miquel y Costas & Miquel has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Miquel y Costas & Miquel

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Miquel y Costas & Miquel is paying out just 16% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Luckily it paid out just 19% of its free cash flow last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Miquel y Costas & Miquel paid out over the last 12 months.

BME:MCM Historic Dividend July 5th 2021

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see Miquel y Costas & Miquel's earnings per share have risen 11% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Miquel y Costas & Miquel has lifted its dividend by approximately 14% a year on average. 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 Miquel y Costas & Miquel an attractive dividend stock, or better left on the shelf? It's great that Miquel y Costas & Miquel is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Miquel y Costas & Miquel, and we would prioritise taking a closer look at it.

Want to learn more about Miquel y Costas & Miquel? Here's a visualisation of its historical rate of revenue and earnings growth.

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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