Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Mordovia Energy Retail Company Public Joint-Stock Company (MCX:MRSB) is about to trade ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. 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. This means that investors who purchase Mordovia Energy Retail Company's shares on or after the 5th of July will not receive the dividend, which will be paid on the 1st of January.
The company's upcoming dividend is ₽0.037 a share, following on from the last 12 months, when the company distributed a total of ₽0.037 per share to shareholders. Based on the last year's worth of payments, Mordovia Energy Retail Company stock has a trailing yield of around 8.0% on the current share price of RUB0.466. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Mordovia Energy Retail Company is paying out an acceptable 68% of its profit, a common payout level among most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Luckily it paid out just 21% of its free cash flow last year.
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.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. It's encouraging to see Mordovia Energy Retail Company has grown its earnings rapidly, up 39% a year for the past five years. Management appears to be striking a nice balance between reinvesting for growth and paying dividends to shareholders. Earnings per share have been growing quickly and in combination with some reinvestment and a middling payout ratio, the stock may have decent dividend prospects going forwards.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Since the start of our data, 10 years ago, Mordovia Energy Retail Company has lifted its dividend by approximately 7.7% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
Has Mordovia Energy Retail Company got what it takes to maintain its dividend payments? We like Mordovia Energy Retail Company's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. Mordovia Energy Retail Company looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
While it's tempting to invest in Mordovia Energy Retail Company for the dividends alone, you should always be mindful of the risks involved. We've identified 3 warning signs with Mordovia Energy Retail Company (at least 2 which are significant), and understanding these should be part of your investment process.
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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