Should You Buy Makarony Polskie S.A. (WSE:MAK) For Its Upcoming Dividend?

Makarony Polskie S.A. (WSE:MAK) 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. 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. Meaning, you will need to purchase Makarony Polskie's shares before the 2nd of July to receive the dividend, which will be paid on the 12th 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. Last year's total dividend payments show that Makarony Polskie has a trailing yield of 3.8% on the current share price of zł19.85. If you buy this business for its dividend, you should have an idea of whether Makarony Polskie's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for Makarony Polskie

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. Makarony Polskie paid out just 24% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. 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. The good news is it paid out just 12% of its free cash flow in the last 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.

Click here to see how much of its profit Makarony Polskie 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. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's encouraging to see Makarony Polskie has grown its earnings rapidly, up 38% a year for the past five years. Makarony Polskie earnings per share have been sprinting ahead like the Road Runner at a track and field day; scarcely stopping even for a cheeky "beep-beep". We also like that it is reinvesting most of its profits in its business.'

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past nine years, Makarony Polskie has increased its dividend at approximately 18% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Is Makarony Polskie an attractive dividend stock, or better left on the shelf? Makarony Polskie has grown its earnings per share while simultaneously reinvesting in the business. Unfortunately it's cut the dividend at least once in the past nine years, but the conservative payout ratio makes the current dividend look sustainable. Makarony Polskie looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

On that note, you'll want to research what risks Makarony Polskie is facing. For example, we've found 3 warning signs for Makarony Polskie that we recommend you consider before investing in the business.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com