In This Article:
Readers hoping to buy Macquarie Group Limited (ASX:MQG) 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 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. Meaning, you will need to purchase Macquarie Group's shares before the 16th of May to receive the dividend, which will be paid on the 4th of July.
The company's next dividend payment will be AU$3.50 per share. Last year, in total, the company distributed AU$6.22 to shareholders. Last year's total dividend payments show that Macquarie Group has a trailing yield of 3.5% on the current share price of A$180.02. 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 check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Macquarie Group
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately Macquarie Group's payout ratio is modest, at just 49% of profit.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. Fortunately for readers, Macquarie Group's earnings per share have been growing at 13% a year for the past five years.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Macquarie Group has delivered an average of 14% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.
The Bottom Line
Has Macquarie Group got what it takes to maintain its dividend payments? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. Perhaps even more importantly - this can sometimes signal management is focused on the long term future of the business. In summary, Macquarie Group appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.