M&G plc (LON:MNG) Passed Our Checks, And It's About To Pay A UK£0.12 Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see M&G plc (LON:MNG) is about to trade ex-dividend in the next four days. If you purchase the stock on or after the 18th of March, you won't be eligible to receive this dividend, when it is paid on the 28th of April.

M&G's next dividend payment will be UK£0.12 per share, on the back of last year when the company paid a total of UK£0.18 to shareholders. Calculating the last year's worth of payments shows that M&G has a trailing yield of 8.1% on the current share price of £2.256. If you buy this business for its dividend, you should have an idea of whether M&G's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for M&G

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. M&G paid out a comfortable 41% of its profit last year.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

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

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why we're glad to see earnings per share up 8.6% over the past 12 months.

One year is a very short time frame in the pantheon of investing, so we wouldn't get too hung up on these numbers.

Given that M&G has only been paying a dividend for a year, there's not much of a past history to draw insight from.

The Bottom Line

Has M&G got what it takes to maintain its dividend payments? M&G has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. M&G ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 3 warning signs for M&G (of which 1 makes us a bit uncomfortable!) you should know about.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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