Yahoo Finance What To Know Before Buying Magellan Aerospace Corporation (TSE:MAL) For Its Dividend
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A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Magellan Aerospace Corporation (TSE:MAL) has paid a dividend to shareholders. It currently yields 2.3%. Does Magellan Aerospace tick all the boxes of a great dividend stock? Below, I'll take you through my analysis.
View our latest analysis for Magellan Aerospace
5 checks you should do on 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?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has dividend per share risen in the past couple of years?
Is is able to pay the current rate of dividends from its earnings?
Will the company be able to keep paying dividend based on the future earnings growth?
Does Magellan Aerospace pass our checks?
Magellan Aerospace has a trailing twelve-month payout ratio of 23%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 33% which, assuming the share price stays the same, leads to a dividend yield of around 2.6%. However, EPS is forecasted to fall to CA$1.51 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Unfortunately, it is really too early to view Magellan Aerospace as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Magellan Aerospace generates a yield of 2.3%, which is high for Aerospace & Defense stocks but still below the market's top dividend payers.
Next Steps:
If Magellan Aerospace is in your portfolio for cash-generating reasons, there may be better alternatives out there. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I've put together three essential factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for MAL’s future growth? Take a look at our free research report of analyst consensus for MAL’s outlook.
Valuation: What is MAL 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 MAL is currently mispriced by the market.
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 editorial-team@simplywallst.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.
