Here's What We Like About McBride's (LON:MCB) Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see McBride plc (LON:MCB) is about to trade ex-dividend in the next couple of days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. Thus, you can purchase McBride's shares before the 30th of October in order to receive the dividend, which the company will pay on the 28th of November.

The company's next dividend payment will be UK£0.03 per share. Last year, in total, the company distributed UK£0.03 to shareholders. Last year's total dividend payments show that McBride has a trailing yield of 2.4% on the current share price of UK£1.236. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

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 usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. McBride is paying out just 15% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events.

See our latest analysis for McBride

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 fall far enough, the company could be forced to cut its dividend. It's encouraging to see McBride has grown its earnings rapidly, up 39% a year for the past five years. With earnings per share growing rapidly and the company sensibly reinvesting almost all of its profits within the business, McBride looks like a promising growth company.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. McBride has seen its dividend decline 1.8% per annum on average over the past 10 years, which is not great to see.

The Bottom Line

Has McBride got what it takes to maintain its dividend payments? Companies like McBride that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. In summary, McBride appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

In light of that, while McBride has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 3 warning signs with McBride and understanding them should be part of your investment process.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.