Read This Before Considering MarketAxess Holdings Inc. (NASDAQ:MKTX) For Its Upcoming US$0.76 Dividend

It looks like MarketAxess Holdings Inc. (NASDAQ:MKTX) is about to go ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase MarketAxess Holdings' shares before the 20th of August in order to be eligible for the dividend, which will be paid on the 3rd of September.

The company's next dividend payment will be US$0.76 per share, and in the last 12 months, the company paid a total of US$3.04 per share. Looking at the last 12 months of distributions, MarketAxess Holdings has a trailing yield of approximately 1.6% on its current stock price of US$187.63. 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 MarketAxess Holdings has been able to grow its dividends, or if the dividend might be cut.

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If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. MarketAxess Holdings paid out more than half (50%) of its earnings last year, which is a regular payout ratio for most companies.

Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.

See our latest analysis for MarketAxess Holdings

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies that aren't growing their earnings can still be valuable, but it is even more important to assess the sustainability of the dividend if it looks like the company will struggle to grow. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. It's not encouraging to see that MarketAxess Holdings's earnings are effectively flat over the past five years. Better than seeing them fall off a cliff, for sure, but the best dividend stocks grow their earnings meaningfully over the long run.

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, MarketAxess Holdings has lifted its dividend by approximately 17% a year on average.

The Bottom Line

Is MarketAxess Holdings worth buying for its dividend? MarketAxess Holdings has been struggling to generate growth while also paying out more than half of its earnings to shareholders as dividends. In sum this is a middling combination, and we find it hard to get excited about the company from a dividend perspective.

With that being said, if dividends aren't your biggest concern with MarketAxess Holdings, you should know about the other risks facing this business. Our analysis shows 1 warning sign for MarketAxess Holdings and you should be aware of this before buying any shares.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.