MaltaPost p.l.c. (MTSE:MTP) Pays A €0.037 Dividend In Just Three Days

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see MaltaPost p.l.c. (MTSE:MTP) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. 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. In other words, investors can purchase MaltaPost's shares before the 20th of January in order to be eligible for the dividend, which will be paid on the 20th of March.

The company's next dividend payment will be €0.037 per share, on the back of last year when the company paid a total of €0.037 to shareholders. Based on the last year's worth of payments, MaltaPost has a trailing yield of 7.7% on the current stock price of €0.48. 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! So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for MaltaPost

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. Last year MaltaPost paid out 101% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. A useful secondary check can be to evaluate whether MaltaPost generated enough free cash flow to afford its dividend. The good news is it paid out just 13% of its free cash flow in the last year.

It's good to see that while MaltaPost's dividends were not covered by profits, at least they are affordable from a cash perspective. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Extraordinarily few companies are capable of persistently paying a dividend that is greater than their profits.

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

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at MaltaPost, with earnings per share up 6.8% on average over the last five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. MaltaPost has delivered an average of 6.3% per year annual increase in its dividend, based on the past 10 years of dividend payments. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

From a dividend perspective, should investors buy or avoid MaltaPost? MaltaPost has been steadily growing its earnings per share, and it is paying out just 13% of its cash flow but an uncomfortably high 101% of its income. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

If you want to look further into MaltaPost, it's worth knowing the risks this business faces. To that end, you should learn about the 3 warning signs we've spotted with MaltaPost (including 2 which don't sit too well with us).

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.