Yahoo Finance We Wouldn't Be Too Quick To Buy Magellan Aerospace Corporation (TSE:MAL) Before It Goes Ex-Dividend
It looks like Magellan Aerospace Corporation (TSE:MAL) is about to go ex-dividend in the next 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Magellan Aerospace's shares on or after the 14th of December will not receive the dividend, which will be paid on the 30th of December.
The company's next dividend payment will be CA$0.025 per share, and in the last 12 months, the company paid a total of CA$0.10 per share. Based on the last year's worth of payments, Magellan Aerospace stock has a trailing yield of around 1.4% on the current share price of CA$7.15. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Magellan Aerospace can afford its dividend, and if the dividend could grow.
Check out our latest analysis for Magellan Aerospace
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. Magellan Aerospace reported a loss last year, so it's not great to see that it has continued paying a dividend. Considering the lack of profitability, we also need to check if the company generated enough cash flow to cover the dividend payment. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Dividends consumed 64% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Magellan Aerospace 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.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Magellan Aerospace has seen its dividend decline 2.0% per annum on average over the past nine years, which is not great to see. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.
We update our analysis on Magellan Aerospace every 24 hours, so you can always get the latest insights on its financial health, here.
Final Takeaway
Is Magellan Aerospace an attractive dividend stock, or better left on the shelf? 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." With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Magellan Aerospace.
Curious what other investors think of Magellan Aerospace? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
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.
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