Should You Buy MPL Verbum S.A. (WSE:VER) For Its Upcoming Dividend?

It looks like MPL Verbum S.A. (WSE:VER) is about to go ex-dividend in the next 3 days. If you purchase the stock on or after the 23rd of November, you won't be eligible to receive this dividend, when it is paid on the 4th of December.

MPL Verbum's next dividend payment will be zł0.11 per share, and in the last 12 months, the company paid a total of zł0.11 per share. Based on the last year's worth of payments, MPL Verbum has a trailing yield of 3.9% on the current stock price of PLN2.8. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether MPL Verbum has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for MPL Verbum

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. MPL Verbum paid out a comfortable 48% of its profit last year. 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 20% of its free cash flow as dividends last year, which is conservatively low.

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 MPL Verbum 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see MPL Verbum's earnings per share have risen 16% per annum over the last five years. The company has managed to grow earnings at a rapid rate, while reinvesting most of the profits within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. MPL Verbum has delivered an average of 14% per year annual increase in its dividend, based on the past six years of dividend payments. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Is MPL Verbum worth buying for its dividend? It's great that MPL Verbum 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. It's a promising combination that should mark this company worthy of closer attention.

So while MPL Verbum looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 3 warning signs for MPL Verbum (1 shouldn't be ignored!) that deserve your attention before investing in the shares.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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