M.T.I Wireless Edge Ltd. (LON:MWE) Looks Interesting, And It's About To Pay A Dividend

M.T.I Wireless Edge Ltd. (LON:MWE) stock is about to trade ex-dividend in three days. You can purchase shares before the 18th of March in order to receive the dividend, which the company will pay on the 31st of March.

M.T.I Wireless Edge's next dividend payment will be US$0.02 per share, and in the last 12 months, the company paid a total of US$0.025 per share. Based on the last year's worth of payments, M.T.I Wireless Edge stock has a trailing yield of around 2.0% on the current share price of £0.9. 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.

See our latest analysis for M.T.I Wireless Edge

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.T.I Wireless Edge paid out 65% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 50% of its free cash flow in the past year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit M.T.I Wireless Edge paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see M.T.I Wireless Edge's earnings per share have risen 10% per annum over the last five years. M.T.I Wireless Edge has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last nine years, M.T.I Wireless Edge has lifted its dividend by approximately 2.9% a year on average. Earnings per share have been growing much quicker than dividends, potentially because M.T.I Wireless Edge is keeping back more of its profits to grow the business.

To Sum It Up

Is M.T.I Wireless Edge an attractive dividend stock, or better left on the shelf? M.T.I Wireless Edge's growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. It's a promising combination that should mark this company worthy of closer attention.

So while M.T.I Wireless Edge looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. In terms of investment risks, we've identified 2 warning signs with M.T.I Wireless Edge and understanding them should be part of your investment process.

If you're in the market for dividend stocks, we recommend checking our list of top 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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