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Mullen Group Ltd. (TSE:MTL) stock is about to trade ex-dividend in three days. You can purchase shares before the 27th of November in order to receive the dividend, which the company will pay on the 15th of December.
Mullen Group's next dividend payment will be CA$0.03 per share. Last year, in total, the company distributed CA$0.36 to shareholders. Looking at the last 12 months of distributions, Mullen Group has a trailing yield of approximately 3.8% on its current stock price of CA$9.49. 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.
View our latest analysis for Mullen Group
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Mullen Group paid out 64% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 26% of its free cash flow as dividends, a comfortable payout level for most companies.
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 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 earnings fall far enough, the company could be forced to cut its dividend. Mullen Group's earnings per share have fallen at approximately 10% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Mullen Group's dividend payments per share have declined at 3.2% per year on average over the past 10 years, which is uninspiring. 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.
The Bottom Line
Should investors buy Mullen Group for the upcoming dividend? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. All things considered, we are not particularly enthused about Mullen Group from a dividend perspective.