Could Public Joint-Stock Company Moscow Exchange MICEX-RTS (MCX:MOEX) be an attractive dividend share to own for the long haul? Investors are often drawn to strong companies with the idea of reinvesting the dividends. If you are hoping to live on the income from dividends, it's important to be a lot more stringent with your investments than the average punter.
In this case, Moscow Exchange MICEX-RTS likely looks attractive to dividend investors, given its 4.7% dividend yield and eight-year payment history. It sure looks interesting on these metrics - but there's always more to the story. Some simple analysis can reduce the risk of holding Moscow Exchange MICEX-RTS for its dividend, and we'll focus on the most important aspects below.
Dividends are usually paid out of company earnings. If a company is paying more than it earns, then the dividend might become unsustainable - hardly an ideal situation. So we need to form a view on if a company's dividend is sustainable, relative to its net profit after tax. Moscow Exchange MICEX-RTS paid out 71% of its profit as dividends, over the trailing twelve month period. This is a fairly normal payout ratio among most businesses. It allows a higher dividend to be paid to shareholders, but does limit the capital retained in the business - which could be good or bad.
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. The first recorded dividend for Moscow Exchange MICEX-RTS, in the last decade, was eight years ago. Although it has been paying a dividend for several years now, the dividend has been cut at least once, and we're cautious about the consistency of its dividend across a full economic cycle. During the past eight-year period, the first annual payment was ₽0.3 in 2013, compared to ₽7.9 last year. This works out to be a compound annual growth rate (CAGR) of approximately 49% a year over that time. The growth in dividends has not been linear, but the CAGR is a decent approximation of the rate of change over this time frame.
It's not great to see that the payment has been cut in the past. We're generally more wary of companies that have cut their dividend before, as they tend to perform worse in an economic downturn.
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. In the last five years, Moscow Exchange MICEX-RTS' earnings per share have shrunk at approximately 2.3% per annum. If earnings continue to decline, the dividend may come under pressure. Every investor should make an assessment of whether the company is taking steps to stabilise the situation.
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. First, we think Moscow Exchange MICEX-RTS has an acceptable payout ratio. Second, earnings per share have been in decline, and its dividend has been cut at least once in the past. To conclude, we've spotted a couple of potential concerns with Moscow Exchange MICEX-RTS that may make it less than ideal candidate for dividend investors.
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. For example, we've picked out 1 warning sign for Moscow Exchange MICEX-RTS that investors should know about before committing capital to this stock.
We have also put together a list of global stocks with a market capitalisation above $1bn and yielding more 3%.
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Moscow Exchange MICEX-RTS
Public Joint-Stock Company Moscow Exchange MICEX-RTS, an integrated exchange, provides competitive trading, clearing, settlement, depository, and information services to financial market participants.
Outstanding track record and good value.