Read This Before Considering Miquel y Costas & Miquel, S.A. (BME:MCM) For Its Upcoming €0.09315 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Miquel y Costas & Miquel, S.A. (BME:MCM) is about to trade ex-dividend in the next 3 days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Therefore, if you purchase Miquel y Costas & Miquel's shares on or after the 14th of April, you won't be eligible to receive the dividend, when it is paid on the 16th of April.

The company's next dividend payment will be €0.09315 per share, and in the last 12 months, the company paid a total of €0.48 per share. Based on the last year's worth of payments, Miquel y Costas & Miquel has a trailing yield of 3.5% on the current stock price of €13.95. 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. So we need to investigate whether Miquel y Costas & Miquel can afford its dividend, and if the dividend could grow.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Miquel y Costas & Miquel paid out a comfortable 30% of its profit last year. A useful secondary check can be to evaluate whether Miquel y Costas & Miquel generated enough free cash flow to afford its dividend. Over the past year it paid out 154% of its free cash flow as dividends, which is uncomfortably high. We're curious about why the company paid out more cash than it generated last year, since this can be one of the early signs that a dividend may be unsustainable.

While Miquel y Costas & Miquel's dividends were covered by the company's reported profits, cash is somewhat more important, so it's not great to see that the company didn't generate enough cash to pay its dividend. Cash is king, as they say, and were Miquel y Costas & Miquel to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Check out our latest analysis for Miquel y Costas & Miquel

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

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that Miquel y Costas & Miquel's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run. Earnings have been growing somewhat, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, eight years ago, Miquel y Costas & Miquel has lifted its dividend by approximately 11% a year on average.

Final Takeaway

Has Miquel y Costas & Miquel got what it takes to maintain its dividend payments? Earnings per share have been effectively flat over this time, and Miquel y Costas & Miquel's paying out less than half its profits and 154% of its cash flow. Only rarely do we find companies paying out a low percentage of their profits yet a high percentage of their cash flow, so we'd mark this as a concern. In summary, it's hard to get excited about Miquel y Costas & Miquel from a dividend perspective.

If you want to look further into Miquel y Costas & Miquel, it's worth knowing the risks this business faces. For instance, we've identified 2 warning signs for Miquel y Costas & Miquel (1 is significant) you should be aware of.

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

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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.