Why It Might Not Make Sense To Buy MetLife, Inc. (NYSE:MET) For Its Upcoming Dividend

It looks like MetLife, Inc. (NYSE:MET) is about to go ex-dividend in the next four 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, MetLife investors that purchase the stock on or after the 5th of November will not receive the dividend, which will be paid on the 16th of December.

The company's next dividend payment will be US$0.545 per share, on the back of last year when the company paid a total of US$2.18 to shareholders. Last year's total dividend payments show that MetLife has a trailing yield of 2.6% on the current share price of US$83.18. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether MetLife can afford its dividend, and if the dividend could grow.

Check out our latest analysis for MetLife

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. MetLife is paying out an acceptable 57% of its profit, a common payout level among most companies.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

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

Have Earnings And Dividends Been Growing?

Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's not ideal to see MetLife's earnings per share have been shrinking at 4.8% a year over the previous five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, MetLife has lifted its dividend by approximately 7.1% a year on average. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.

Final Takeaway

Is MetLife worth buying for its dividend? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.

Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with MetLife. Our analysis shows 1 warning sign for MetLife and you should be aware of this before buying any shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.