Some investors rely on dividends to grow their wealth, and if you’re one of those dividend sleuths, you might be intrigued to know that International Matthews Society (NASDAQ: MATW) is set to go ex-dividend in just three days. The ex-dividend date is one business day before a company’s record date, which is the date the company determines which shareholders are entitled to receive a dividend. It is important to know the ex-dividend date, because any trade in the stock must have settled on or before the record date. So you can buy Matthews International shares before August 5 in order to receive the dividend, which the company will pay on August 22.
The company’s next dividend is $0.22 per share, following the past 12 months, when the company distributed a total of $0.88 per share to shareholders. Based on last year’s payouts, Matthews International stock has a yield of about 3.1% on the current share price of $27.95. Dividends contribute greatly to investment returns for long-term holders, but only if the dividend continues to be paid. That’s why we always have to check if the dividend payouts seem sustainable and if the business is growing.
Dividends are usually paid out of company earnings, so if a company pays out more than it has earned, its dividend is usually at risk of being reduced. Matthews International’s dividend is not well covered by earnings, as the company lost money last year. This is not a sustainable situation, so it would be worth considering whether earnings should recover. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If Matthews International has not generated enough cash to pay the dividend, it must have paid either from cash in the bank or by borrowing money, which is unsustainable in the long term. It distributed 31% of its free cash flow as dividends, a comfortable level of distribution for most companies.
Have earnings and dividends increased?
Companies with declining profits are riskier for dividend shareholders. If earnings fall enough, the company could be forced to cut its dividend. Matthews International posted a loss last year, and the general trend suggests that its earnings have also been declining in recent years, leading us to wonder if the dividend is at risk.
Another key way to gauge a company’s dividend outlook is to measure its historical rate of dividend growth. Matthews International has recorded dividend growth of 9.3% per year on average over the past 10 years.
We update our analysis on Matthews International every 24 hours, so you can always get the latest information on its financial health, here.
To sum up
Should investors buy Matthews International for the next dividend? We are a little uncomfortable with the fact that it pays a dividend while being in deficit. However, we note that the dividend was covered by cash flow. Overall, it doesn’t seem like the most suitable dividend-paying stock for a long-term investor.
However, if you are still interested in Matthews International and want to learn more, it will be very useful for you to know what risks this title faces. To help you, we found 2 warning signs for Matthews International (1 is significant!) that you should be aware of before buying the shares.
If you are looking for good dividend payers, we recommend by consulting our selection of the best dividend-paying stocks.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
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