Readers hoping to buy M&T Bank Corporation (NYSE:MTB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible 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. Thus, you can purchase M&T Bank's shares before the 25th of February in order to receive the dividend, which the company will pay on the 31st of March.
The company's next dividend payment will be US$1.20 per share, on the back of last year when the company paid a total of US$4.80 to shareholders. Based on the last year's worth of payments, M&T Bank has a trailing yield of 2.6% on the current stock price of $182.35. 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 investigate whether M&T Bank can afford its dividend, and if the dividend could grow.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. That's why it's good to see M&T Bank paying out a modest 33% of its earnings.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see M&T Bank's earnings per share have risen 12% per annum over the last five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, M&T Bank has increased its dividend at approximately 5.5% a year on average. Earnings per share have been growing much quicker than dividends, potentially because M&T Bank is keeping back more of its profits to grow the business.
Is M&T Bank worth buying for its dividend? Companies like M&T Bank that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. Overall, M&T Bank looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
Curious what other investors think of M&T Bank? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.