Read This Before Considering Myers Industries, Inc. (NYSE:MYE) For Its Upcoming US$0.135 Dividend

It looks like Myers Industries, Inc. (NYSE:MYE) is about to go ex-dividend in the next three 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. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Myers Industries' shares before the 3rd of December in order to be eligible for the dividend, which will be paid on the 3rd of January.

The company's next dividend payment will be US$0.135 per share, on the back of last year when the company paid a total of US$0.54 to shareholders. Last year's total dividend payments show that Myers Industries has a trailing yield of 4.7% on the current share price of US$11.45. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

Check out our latest analysis for Myers Industries

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Myers Industries distributed an unsustainably high 130% of its profit as dividends to shareholders last year. Without more sustainable payment behaviour, the dividend looks precarious. A useful secondary check can be to evaluate whether Myers Industries generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 44% of the free cash flow it generated, which is a comfortable payout ratio.

It's disappointing to see that the dividend was not covered by profits, but cash is more important from a dividend sustainability perspective, and Myers Industries fortunately did generate enough cash to fund its dividend. If executives were to continue paying more in dividends than the company reported in profits, we'd view this as a warning sign. Very few companies are able to sustainably pay dividends larger than their reported earnings.

Click here to see how much of its profit Myers Industries 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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. This is why it's a relief to see Myers Industries earnings per share are up 7.3% 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. Myers Industries's dividend payments are broadly unchanged compared to where they were 10 years ago.

To Sum It Up

Is Myers Industries worth buying for its dividend? Myers Industries has been steadily growing its earnings per share, and it is paying out just 44% of its cash flow but an uncomfortably high 130% of its income. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

With that being said, if dividends aren't your biggest concern with Myers Industries, you should know about the other risks facing this business. For example, we've found 4 warning signs for Myers Industries (1 is a bit concerning!) that deserve your attention before investing in the shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.