Readers hoping to buy Morses Club PLC (LON:MCL) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. 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. Meaning, you will need to purchase Morses Club's shares before the 13th of January to receive the dividend, which will be paid on the 11th of February.
The company's upcoming dividend is UK£0.01 a share, following on from the last 12 months, when the company distributed a total of UK£0.03 per share to shareholders. Looking at the last 12 months of distributions, Morses Club has a trailing yield of approximately 4.9% on its current stock price of £0.61. 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! So we need to investigate whether Morses Club can afford its dividend, and if the dividend could grow.
View our latest analysis for Morses Club
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Morses Club paid out a disturbingly high 353% of its profit as dividends last year, which makes us concerned there's something we don't fully understand in the business.
When the dividend payout ratio is high, as it is in this case, the dividend is usually at greater risk of being cut in the future.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Morses Club's earnings per share have plummeted approximately 33% a year over the previous five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Morses Club has seen its dividend decline 14% per annum on average over the past five 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.