Don't Race Out To Buy Marsden Maritime Holdings Limited (NZSE:MMH) Just Because It's Going Ex-Dividend

Marsden Maritime Holdings Limited (NZSE:MMH) stock is about to trade ex-dividend in four days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a 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. Accordingly, Marsden Maritime Holdings investors that purchase the stock on or after the 18th of March will not receive the dividend, which will be paid on the 28th of March.

The company's next dividend payment will be NZ$0.0705882 per share, and in the last 12 months, the company paid a total of NZ$0.13 per share. Last year's total dividend payments show that Marsden Maritime Holdings has a trailing yield of 3.2% on the current share price of NZ$4.25. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for Marsden Maritime Holdings

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Marsden Maritime Holdings paid out more than half (72%) of its earnings last year, which is a regular payout ratio for 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. It paid out more than half (68%) of its free cash flow in the past year, which is within an average range for most companies.

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 Marsden Maritime Holdings paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If earnings fall far enough, the company could be forced to cut its dividend. So we're not too excited that Marsden Maritime Holdings's earnings are down 3.7% a year over the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Marsden Maritime Holdings has lifted its dividend by approximately 3.0% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.

The Bottom Line

Is Marsden Maritime Holdings worth buying for its dividend? While earnings per share are shrinking, it's encouraging to see that at least Marsden Maritime Holdings's dividend appears sustainable, with earnings and cashflow payout ratios that are within reasonable bounds. It's not that we think Marsden Maritime Holdings is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

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 Marsden Maritime Holdings. In terms of investment risks, we've identified 1 warning sign with Marsden Maritime Holdings 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.