Is It Smart To Buy Makarony Polskie S.A. (WSE:MAK) Before It Goes Ex-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 Makarony Polskie S.A. (WSE:MAK) is about to go ex-dividend in just 4 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 Makarony Polskie's shares on or after the 4th of July, you won't be eligible to receive the dividend, when it is paid on the 17th of July.

The company's next dividend payment will be zł0.75 per share, and in the last 12 months, the company paid a total of zł0.75 per share. Based on the last year's worth of payments, Makarony Polskie stock has a trailing yield of around 3.9% on the current share price of zł19.00. 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 investigate whether Makarony Polskie can afford its dividend, and if the dividend could grow.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Makarony Polskie paying out a modest 26% of its earnings. A useful secondary check can be to evaluate whether Makarony Polskie generated enough free cash flow to afford its dividend. Fortunately, it paid out only 37% of its free cash flow in the past year.

It's positive to see that Makarony Polskie'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.

Check out our latest analysis for Makarony Polskie

Click here to see how much of its profit Makarony Polskie 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 fall far enough, the company could be forced to cut its dividend. It's encouraging to see Makarony Polskie has grown its earnings rapidly, up 48% a year for the past five years. Makarony Polskie is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, Makarony Polskie has lifted its dividend by approximately 16% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

Final Takeaway

Should investors buy Makarony Polskie for the upcoming dividend? It's great that Makarony Polskie is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. There's a lot to like about Makarony Polskie, and we would prioritise taking a closer look at it.

While it's tempting to invest in Makarony Polskie for the dividends alone, you should always be mindful of the risks involved. Case in point: We've spotted 2 warning signs for Makarony Polskie you should be aware of.

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.