Yahoo Finance It Might Not Be A Great Idea To Buy Mercury General Corporation (NYSE:MCY) For Its Next Dividend
Mercury General Corporation (NYSE:MCY) is about to trade ex-dividend in the next 4 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 Mercury General's shares on or after the 14th of March will not receive the dividend, which will be paid on the 29th of March.
The company's upcoming dividend is US$0.32 a share, following on from the last 12 months, when the company distributed a total of US$1.27 per share to shareholders. Based on the last year's worth of payments, Mercury General stock has a trailing yield of around 4.0% on the current share price of $31.83. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether Mercury General has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for Mercury General
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Mercury General reported a loss after tax last year, which means it's paying a dividend despite being unprofitable. While this might be a one-off event, this is unlikely to be sustainable in the long term.
Click here to see how much of its profit Mercury General paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Mercury General 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.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Mercury General has seen its dividend decline 6.3% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
We update our analysis on Mercury General every 24 hours, so you can always get the latest insights on its financial health, here.
To Sum It Up
From a dividend perspective, should investors buy or avoid Mercury General? It's hard to get past the idea of Mercury General paying a dividend despite reporting a loss over the past year - especially when the general trend in its earnings also looks to be negative. Mercury General doesn't appear to have a lot going for it, and we're not inclined to take a risk on owning it for the dividend.
With that in mind though, if the poor dividend characteristics of Mercury General don't faze you, it's worth being mindful of the risks involved with this business. For example, we've found 1 warning sign for Mercury General that we recommend you consider before investing in the business.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
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