Why You Might Be Interested In Miquel y Costas & Miquel, S.A. (BME:MCM) For Its Upcoming 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 occurs one day 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Miquel y Costas & Miquel's shares before the 16th of December to receive the dividend, which will be paid on the 18th of December.

The company's upcoming dividend is €0.087075 a share, following on from the last 12 months, when the company distributed a total of €0.46 per share to shareholders. Last year's total dividend payments show that Miquel y Costas & Miquel has a trailing yield of 3.7% on the current share price of €12.35. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out 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 paid out a comfortable 39% of its profit last year. 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. Thankfully its dividend payments took up just 41% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Miquel y Costas & Miquel'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 Miquel y Costas & Miquel paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Miquel y Costas & Miquel, with earnings per share up 6.7% on average over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Miquel y Costas & Miquel has lifted its dividend by approximately 15% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

The Bottom Line

Has Miquel y Costas & Miquel got what it takes to maintain its dividend payments? Earnings per share growth has been growing somewhat, and Miquel y Costas & Miquel is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Miquel y Costas & Miquel is being conservative with its dividend payouts and could still perform reasonably over the long run. Miquel y Costas & Miquel looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

In light of that, while Miquel y Costas & Miquel has an appealing dividend, it's worth knowing the risks involved with this stock. Be aware that Miquel y Costas & Miquel is showing 2 warning signs in our investment analysis, and 1 of those can't be ignored...

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.