Is It Worth Considering Malita Investments p.l.c. (MTSE:MLT) For Its Upcoming Dividend?

Malita Investments p.l.c. (MTSE:MLT) stock is about to trade ex-dividend in four days. The ex-dividend date is one business day 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. This means that investors who purchase Malita Investments' shares on or after the 10th of September will not receive the dividend, which will be paid on the 2nd of October.

The company's next dividend payment will be €0.0132 per share. Last year, in total, the company distributed €0.035 to shareholders. Looking at the last 12 months of distributions, Malita Investments has a trailing yield of approximately 6.4% on its current stock price of €0.545. 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.

Check out our latest analysis for Malita Investments

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Malita Investments is paying out an acceptable 59% of its profit, a common payout level among most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year it paid out 53% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Malita Investments's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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

Have Earnings And Dividends Been Growing?

Stocks with flat earnings can still be attractive dividend payers, but it is important to be more conservative with your approach and demand a greater margin for safety when it comes to dividend sustainability. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's not encouraging to see that Malita Investments's earnings are effectively flat over the past five years. It's better than seeing them drop, certainly, but over the long term, all of the best dividend stocks are able to meaningfully grow their earnings per share.

We'd also point out that Malita Investments issued a meaningful number of new shares in the past year. It's hard to grow dividends per share when a company keeps creating new shares.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Malita Investments has seen its dividend decline 1.4% per annum on average over the past 10 years, which is not great to see.

To Sum It Up

Is Malita Investments worth buying for its dividend? While earnings per share are flat, at least Malita Investments has not committed itself to an unsustainable dividend, with its earnings and cashflow payout ratios within reasonable bounds. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Malita Investments. Our analysis shows 5 warning signs for Malita Investments that we strongly recommend you have a look at before investing in the company.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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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.