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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see MS INTERNATIONAL plc (LON:MSI) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a 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. Meaning, you will need to purchase MS INTERNATIONAL's shares before the 11th of July to receive the dividend, which will be paid on the 23rd of August.
The company's upcoming dividend is UK£0.165 a share, following on from the last 12 months, when the company distributed a total of UK£0.20 per share to shareholders. Last year's total dividend payments show that MS INTERNATIONAL has a trailing yield of 1.8% on the current share price of UK£10.825. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
See our latest analysis for MS INTERNATIONAL
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. That's why it's good to see MS INTERNATIONAL paying out a modest 27% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Luckily it paid out just 8.3% of its free cash flow last year.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see how much of its profit MS INTERNATIONAL paid out over the last 12 months.
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 earnings fall far enough, the company could be forced to cut its dividend. That's why it's comforting to see MS INTERNATIONAL's earnings have been skyrocketing, up 25% per annum for the past five years. MS INTERNATIONAL is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. Companies with growing earnings and low payout ratios are often the best long-term dividend stocks, as the company can both grow its earnings and increase the percentage of earnings that it pays out, essentially multiplying the dividend.