Should Income Investors Look At Mortgage Advice Bureau (Holdings) plc (LON:MAB1) Before Its Ex-Dividend?

Mortgage Advice Bureau (Holdings) plc (LON:MAB1) stock is about to trade ex-dividend in 4 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. In other words, investors can purchase Mortgage Advice Bureau (Holdings)'s shares before the 2nd of October in order to be eligible for the dividend, which will be paid on the 31st of October.

The company's next dividend payment will be UK£0.072 per share, on the back of last year when the company paid a total of UK£0.28 to shareholders. Last year's total dividend payments show that Mortgage Advice Bureau (Holdings) has a trailing yield of 3.9% on the current share price of UK£7.20. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Mortgage Advice Bureau (Holdings) has been able to grow its dividends, or if the dividend might be cut.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Mortgage Advice Bureau (Holdings) is paying out an acceptable 67% of its profit, a common payout level among most companies.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

View our latest analysis for Mortgage Advice Bureau (Holdings)

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Mortgage Advice Bureau (Holdings), with earnings per share up 3.1% on average over the last five years.

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, 10 years ago, Mortgage Advice Bureau (Holdings) has lifted its dividend by approximately 30% 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.

To Sum It Up

Is Mortgage Advice Bureau (Holdings) worth buying for its dividend? Earnings per share have been growing at a reasonable rate, and the company is paying out a bit over half its earnings as dividends. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're on the fence about its dividend prospects.

So if you want to do more digging on Mortgage Advice Bureau (Holdings), you'll find it worthwhile knowing the risks that this stock faces. For example - Mortgage Advice Bureau (Holdings) has 1 warning sign we think you should be aware of.

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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.