Read This Before Considering Mitie Group plc (LON:MTO) For Its Upcoming UK£0.03 Dividend

Yahoo

9 hours ago

It looks like Mitie Group plc (LON:MTO) is about to go ex-dividend in the next three days. The ex-dividend date is usually set to be two business days before the record date, which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade can take two business days or more to settle. Accordingly, Mitie Group investors that purchase the stock on or after the 19th of June will not receive the dividend, which will be paid on the 4th of August.
The company's next dividend payment will be UK£0.03 per share, on the back of last year when the company paid a total of UK£0.043 to shareholders. Based on the last year's worth of payments, Mitie Group stock has a trailing yield of around 3.0% on the current share price of UK£1.44. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Mitie Group is paying out an acceptable 52% of its profit, a common payout level among most companies. 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 29% 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.
View our latest analysis for Mitie Group
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
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. Readers will understand then, why we're concerned to see Mitie Group's earnings per share have dropped 5.7% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Mitie Group's dividend payments per share have declined at 9.5% per year on average over the past 10 years, which is uninspiring. 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.
Is Mitie Group an attractive dividend stock, or better left on the shelf? 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. To summarise, Mitie Group looks okay on this analysis, although it doesn't appear a stand-out opportunity.
So if you want to do more digging on Mitie Group, you'll find it worthwhile knowing the risks that this stock faces. For example, we've found 1 warning sign for Mitie Group that we recommend you consider before investing in the business.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.