Is Mannai Corporation Q.P.S.C. (DSM:MCCS) A Risky Dividend Stock?

Today we'll take a closer look at Mannai Corporation Q.P.S.C. (DSM:MCCS) from a dividend investor's perspective. Owning a strong business and reinvesting the dividends is widely seen as an attractive way of growing your wealth. Unfortunately, it's common for investors to be enticed in by the seemingly attractive yield, and lose money when the company has to cut its dividend payments.

A high yield and a long history of paying dividends is an appealing combination for Mannai Corporation Q.P.S.C. We'd guess that plenty of investors have purchased it for the income. When buying stocks for their dividends, you should always run through the checks below, to see if the dividend looks sustainable.

Explore this interactive chart for our latest analysis on Mannai Corporation Q.P.S.C!

Payout ratios

Companies (usually) pay dividends out of their earnings. If a company is paying more than it earns, the dividend might have to be cut. So we need to form a view on if a company's dividend is sustainable, relative to its net profit after tax. Although Mannai Corporation Q.P.S.C pays a dividend, it was loss-making during the past year. When a company is loss-making, we next need to check to see if its cash flows can support the dividend.

Mannai Corporation Q.P.S.C's cash payout ratio last year was 8.0%, which is quite low and suggests that the dividend was thoroughly covered by cash flow.

We update our data on Mannai Corporation Q.P.S.C every 24 hours, so you can always get our latest analysis of its financial health, here.

Dividend Volatility

Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. Mannai Corporation Q.P.S.C has been paying dividends for a long time, but for the purpose of this analysis, we only examine the past 10 years of payments. Its dividend payments have declined on at least one occasion over the past 10 years. During the past 10-year period, the first annual payment was ر.ق0.3 in 2011, compared to ر.ق0.2 last year. This works out to be a decline of approximately 3.2% per year over that time. Mannai Corporation Q.P.S.C's dividend has been cut sharply at least once, so it hasn't fallen by 3.2% every year, but this is a decent approximation of the long term change.

A shrinking dividend over a 10-year period is not ideal, and we'd be concerned about investing in a dividend stock that lacks a solid record of growing dividends per share.

Dividend Growth Potential

With a relatively unstable dividend, it's even more important to evaluate if earnings per share (EPS) are growing - it's not worth taking the risk on a dividend getting cut, unless you might be rewarded with larger dividends in future. Mannai Corporation Q.P.S.C's earnings per share have shrunk at 26% a year over the past five years. With this kind of significant decline, we always wonder what has changed in the business. Dividends are about stability, and Mannai Corporation Q.P.S.C's earnings per share, which support the dividend, have been anything but stable.

Conclusion

Dividend investors should always want to know if a) a company's dividends are affordable, b) if there is a track record of consistent payments, and c) if the dividend is capable of growing. We're a bit uncomfortable with the company paying a dividend while being loss-making, although at least the dividend was covered by free cash flow. Earnings per share are down, and Mannai Corporation Q.P.S.C's dividend has been cut at least once in the past, which is disappointing. With this information in mind, we think Mannai Corporation Q.P.S.C may not be an ideal dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 3 warning signs for Mannai Corporation Q.P.S.C (of which 2 are potentially serious!) you should know about.

We have also put together a list of global stocks with a market capitalisation above $1bn and yielding more 3%.

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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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