Yahoo Finance Here's What We Like About Medallion Financial's (NASDAQ:MFIN) Upcoming Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Medallion Financial Corp. (NASDAQ:MFIN) is about to go ex-dividend in just three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. 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. Therefore, if you purchase Medallion Financial's shares on or after the 14th of May, you won't be eligible to receive the dividend, when it is paid on the 31st of May.
The company's next dividend payment will be US$0.10 per share. Last year, in total, the company distributed US$0.40 to shareholders. Last year's total dividend payments show that Medallion Financial has a trailing yield of 5.2% on the current share price of US$7.75. If you buy this business for its dividend, you should have an idea of whether Medallion Financial's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.
Check out our latest analysis for Medallion Financial
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. Medallion Financial paid out just 16% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Medallion Financial's earnings have been skyrocketing, up 53% per annum for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Medallion Financial's dividend payments per share have declined at 7.6% per year on average over the past 10 years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.
The Bottom Line
Is Medallion Financial worth buying for its dividend? Companies like Medallion Financial that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. In summary, Medallion Financial appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, Medallion Financial has 3 warning signs (and 2 which are potentially serious) we think you should know about.
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.
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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.
