It Might Not Be A Great Idea To Buy Marcus & Millichap, Inc. (NYSE:MMI) For Its Next Dividend

Marcus & Millichap, Inc. (NYSE:MMI) stock is about to trade ex-dividend in 2 days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. This means that investors who purchase Marcus & Millichap's shares on or after the 15th of September will not receive the dividend, which will be paid on the 6th of October.

The company's upcoming dividend is US$0.25 a share, following on from the last 12 months, when the company distributed a total of US$0.50 per share to shareholders. Calculating the last year's worth of payments shows that Marcus & Millichap has a trailing yield of 1.5% on the current share price of US$33.19. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Marcus & Millichap has been able to grow its dividends, or if the dividend might be cut.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Marcus & Millichap paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If Marcus & Millichap didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term. It paid out more than half (62%) of its free cash flow in the past year, which is within an average range for most companies.

See our latest analysis for Marcus & Millichap

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

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Marcus & Millichap reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Marcus & Millichap's dividend payments are broadly unchanged compared to where they were four years ago. If a company's dividend stays flat while earnings are in decline, this is typically a sign that it is paying out a larger percentage of its earnings. This can become unsustainable if earnings fall far enough.

Get our latest analysis on Marcus & Millichap's balance sheet health here.

Final Takeaway

From a dividend perspective, should investors buy or avoid Marcus & Millichap? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." It's not that we think Marcus & Millichap is a bad company, but these characteristics don't generally lead to outstanding dividend performance.

So if you're still interested in Marcus & Millichap despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. For example - Marcus & Millichap has 1 warning sign we think you should be aware of.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.