Readers hoping to buy ManTech International Corporation (NASDAQ:MANT) for its dividend will have to come shortly, as the stock is set to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the latest date by which shareholders must be present on the books of the company to be eligible for payment of a dividend. The ex-dividend date is important because the settlement process involves two full business days. So if you miss this date, you will not be on the company’s books as of the record date. This means that investors who buy shares of ManTech International on or after March 10 will not receive the dividend, which will be paid on March 25.
The company’s next dividend payment will be $0.41 per share, and over the past 12 months the company has paid a total of $1.64 per share. Last year’s total dividend payout shows that ManTech International has a 1.9% yield on the current share price of $85.76. We love to see companies pay out a dividend, but it’s also important to make sure that laying the golden eggs doesn’t kill our golden hen! So we need to consider whether ManTech International can afford its dividend, and whether the dividend could increase.
If a company pays out more dividends than it has earned, the dividend may become unsustainable – a less than ideal situation. ManTech International paid out a comfortable 45% of its profits last year. That said, even very profitable companies can sometimes not generate enough cash to pay the dividend, so we should always check if the dividend is covered by cash flow. Fortunately, it only paid out 39% of its free cash flow over the past year.
It is encouraging to see that the dividend is covered by both earnings and cash flow. This generally suggests that the dividend is sustainable, as long as earnings don’t drop precipitously.
Have earnings and dividends increased?
Companies with strong growth prospects are generally the best dividend payers because it is easier to increase dividends when earnings per share improve. If business goes into a recession and the dividend is cut, the company could see its value drop precipitously. Luckily for readers, ManTech International’s earnings per share have grown 18% annually over the past five years. Earnings per share are growing rapidly and the company keeps more than half of its profits with the company; an attractive combination that could suggest the company is focusing on reinvestment to further boost earnings. This will make it easier to fund future growth efforts and we think it’s an attractive combination – plus the dividend can always be increased later.
Many investors will gauge a company’s dividend yield by evaluating how much dividend payouts have changed over time. ManTech International has recorded dividend growth of 6.9% per year on average over the past 10 years. We are pleased to see dividends increasing alongside earnings over several years, which may be a sign that the company intends to share the growth with shareholders.
Should investors buy ManTech International for the upcoming dividend? ManTech International has been growing its profits at a rapid pace and has a moderately low payout ratio, implying that it is reinvesting heavily in its business; a perfect combination. Overall, we think this is an attractive combination worthy of further research.
Although it is tempting to invest in ManTech International just for the dividends, you should always be aware of the risks involved. For example – ManTech International has 1 warning sign we think you should know.
As a general rule, we don’t recommend simply buying the first dividend-paying stock you see. here is a curated list of attractive stocks that are strong dividend payers.
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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.