Shares of Mortgage Advice Bureau (Holdings) PLC (LON:MAB1) will begin trading ex-dividend in 2 days. To qualify for the dividend check of UK£0.13 per share, investors must have owned the shares prior to 25 April 2019, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. Is this future income stream a compelling catalyst for dividend investors to think about the stock as an investment today? Let’s take a look at Mortgage Advice Bureau (Holdings)’s most recent financial data to examine its dividend characteristics in more detail.
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is its annual yield among the top 25% of dividend-paying companies?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has it increased its dividend per share amount over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How does Mortgage Advice Bureau (Holdings) fare?
Mortgage Advice Bureau (Holdings) has a trailing twelve-month payout ratio of 90%, which means that the dividend is not well-covered by its earnings. In the near future, analysts are predicting a payout ratio of 92%, which, assuming the share price stays the same, leads to a dividend yield of around 5.3%. Moreover, EPS should increase to £0.28.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Unfortunately, it is really too early to view Mortgage Advice Bureau (Holdings) as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Relative to peers, Mortgage Advice Bureau (Holdings) generates a yield of 4.1%, which is on the low-side for Mortgage stocks.
After digging a little deeper into Mortgage Advice Bureau (Holdings)’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. Below, I’ve compiled three fundamental aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for MAB1’s future growth? Take a look at our free research report of analyst consensus for MAB1’s outlook.
- Valuation: What is MAB1 worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether MAB1 is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.