Only Four Days Left To Cash In On Mannatech's (NASDAQ:MTEX) Dividend

Mannatech, Incorporated (NASDAQ:MTEX) stock is about to trade ex-dividend in four days. If you purchase the stock on or after the 15th of March, you won't be eligible to receive this dividend, when it is paid on the 30th of March.

Mannatech's next dividend payment will be US$0.16 per share. Last year, in total, the company distributed US$0.64 to shareholders. Last year's total dividend payments show that Mannatech has a trailing yield of 3.6% on the current share price of $17.9574. If you buy this business for its dividend, you should have an idea of whether Mannatech's dividend is reliable and sustainable. So we need to check whether the dividend payments are covered, and if earnings are growing.

Check out our latest analysis for Mannatech

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. Fortunately Mannatech's payout ratio is modest, at just 29% of profit. A useful secondary check can be to evaluate whether Mannatech generated enough free cash flow to afford its dividend. Mannatech paid out more free cash flow than it generated - 117%, to be precise - last year, which we think is concerningly high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

Mannatech does have a large net cash position on the balance sheet, which could fund large dividends for a time, if the company so chose. Still, smart investors know that it is better to assess dividends relative to the cash and profit generated by the business. Paying dividends out of cash on the balance sheet is not long-term sustainable.

Mannatech paid out less in dividends than it reported in profits, but unfortunately it didn't generate enough cash to cover the dividend. Cash is king, as they say, and were Mannatech to repeatedly pay dividends that aren't well covered by cashflow, we would consider this a warning sign.

Click here to see how much of its profit Mannatech paid out over the last 12 months.

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. This is why it's a relief to see Mannatech earnings per share are up 6.3% per annum over the last five years. Earnings have been growing at a steady rate, but we're concerned dividend payments consumed most of the company's cash flow over the past year.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past five years, Mannatech has increased its dividend at approximately 5.1% 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.

The Bottom Line

Is Mannatech an attractive dividend stock, or better left on the shelf? Mannatech has seen its earnings per share grow steadily and paid out less than half its profit over the last year. Unfortunately, its dividend was not well covered by free cash flow. In summary, it's hard to get excited about Mannatech from a dividend perspective.

If you're not too concerned about Mannatech's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. For example, Mannatech has 4 warning signs (and 2 which are a bit unpleasant) we think you should know about.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting 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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