Dividend Investors: Don't Be Too Quick To Buy Taylor Maritime Limited (LON:TMI) For Its Upcoming Dividend

Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Taylor Maritime Limited (LON:TMI) is about to go ex-dividend in just 3 days. The ex-dividend date is commonly two business days before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase Taylor Maritime's shares on or after the 6th of November, you won't be eligible to receive the dividend, when it is paid on the 28th of November.

The company's next dividend payment will be US$0.02 per share. Last year, in total, the company distributed US$0.08 to shareholders. Based on the last year's worth of payments, Taylor Maritime stock has a trailing yield of around 9.6% on the current share price of US$0.835. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

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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. Taylor Maritime's dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable state of affairs, so it would be worth investigating if earnings are expected to recover. With the recent loss, it's important to check if the business generated enough cash to pay its dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Dividends consumed 63% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

Check out our latest analysis for Taylor Maritime

Click here to see how much of its profit Taylor Maritime paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Taylor Maritime reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Taylor Maritime has delivered an average of 3.4% per year annual increase in its dividend, based on the past four years of dividend payments.

We update our analysis on Taylor Maritime every 24 hours, so you can always get the latest insights on its financial health, here.

To Sum It Up

Should investors buy Taylor Maritime for the upcoming dividend? It's hard to get used to Taylor Maritime paying a dividend despite reporting a loss over the past year. At least the dividend was covered by free cash flow, however. Bottom line: Taylor Maritime has some unfortunate characteristics that we think could lead to sub-optimal outcomes for dividend investors.

With that being said, if you're still considering Taylor Maritime as an investment, you'll find it beneficial to know what risks this stock is facing. To that end, you should learn about the 2 warning signs we've spotted with Taylor Maritime (including 1 which is a bit concerning).

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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.