If you are interested in cashing in on Marsh & McLennan Companies, Inc.’s (NYSE:MMC) upcoming dividend of US$0.41 per share, you only have 4 days left to buy the shares before its ex-dividend date, 09 April 2019, in time for dividends payable on the 15 May 2019. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into Marsh & McLennan Companies’s latest financial data to analyse its dividend attributes.
5 questions to ask before buying a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is their annual yield among the top 25% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share amount increased over the past?
- Is its earnings sufficient to payout dividend at the current rate?
- Will it have the ability to keep paying its dividends going forward?
Does Marsh & McLennan Companies pass our checks?
Marsh & McLennan Companies has a trailing twelve-month payout ratio of 50%, which means that the dividend is covered by earnings. However, going forward, analysts expect MMC’s payout to fall to 38% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 2.0%. However, EPS should increase to $4.57, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. In the case of MMC it has increased its DPS from $0.80 to $1.66 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. This is an impressive feat, which makes MMC a true dividend rockstar.
In terms of its peers, Marsh & McLennan Companies produces a yield of 1.8%, which is on the low-side for Insurance stocks.
Considering the dividend attributes we analyzed above, Marsh & McLennan Companies is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three fundamental factors you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for MMC’s future growth? Take a look at our free research report of analyst consensus for MMC’s outlook.
- Valuation: What is MMC worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether MMC is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.