Should You Buy MarketAxess Holdings Inc. (NASDAQ:MKTX) For Its Upcoming Dividend?

It looks like MarketAxess Holdings Inc. (NASDAQ:MKTX) is about to go ex-dividend in the next 3 days. 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. 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. Accordingly, MarketAxess Holdings investors that purchase the stock on or after the 20th of November will not receive the dividend, which will be paid on the 4th of December.

The company's upcoming dividend is US$0.74 a share, following on from the last 12 months, when the company distributed a total of US$2.96 per share to shareholders. Based on the last year's worth of payments, MarketAxess Holdings stock has a trailing yield of around 1.1% on the current share price of US$261.65. 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! We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for MarketAxess Holdings

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see MarketAxess Holdings paying out a modest 40% of its earnings.

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.

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

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see MarketAxess Holdings earnings per share are up 9.6% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. MarketAxess Holdings has delivered 17% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

Has MarketAxess Holdings got what it takes to maintain its dividend payments? MarketAxess Holdings has seen its earnings per share grow slowly in recent years, and the company reinvests more than half of its profits in the business, which generally bodes well for its future prospects. In summary, MarketAxess Holdings appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.

Wondering what the future holds for MarketAxess Holdings? See what the 13 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

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.