Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see MS INTERNATIONAL plc (LON:MSI) is about to trade ex-dividend in the next three days. You will need to purchase shares before the 16th of July to receive the dividend, which will be paid on the 14th of August.
MS INTERNATIONAL's next dividend payment will be UK£0.018 per share, on the back of last year when the company paid a total of UK£0.035 to shareholders. Calculating the last year's worth of payments shows that MS INTERNATIONAL has a trailing yield of 2.6% on the current share price of £1.33. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether MS INTERNATIONAL can afford its dividend, and if the dividend could grow.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. MS INTERNATIONAL reported a loss last year, so it's not great to see that it has continued paying a dividend. 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 MS INTERNATIONAL didn't generate enough cash to pay the dividend, then it must have either paid from cash in the bank or by borrowing money, neither of which is sustainable in the long term.
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. MS INTERNATIONAL reported a loss last year, and the general trend suggests its earnings have also been declining in recent years, making us wonder if the dividend is at risk.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. MS INTERNATIONAL has seen its dividend decline 2.5% per annum on average over the past ten years, which is not great to see. 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.
Remember, you can always get a snapshot of MS INTERNATIONAL's financial health, by checking our visualisation of its financial health, here.
To Sum It Up
From a dividend perspective, should investors buy or avoid MS INTERNATIONAL? It's hard to get used to MS INTERNATIONAL paying a dividend despite reporting a loss over the past year. Worse, the dividend was not well covered by cash flow. It's not an attractive combination from a dividend perspective, and we're inclined to pass on this one for the time being.
So if you're still interested in MS INTERNATIONAL despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Every company has risks, and we've spotted 3 warning signs for MS INTERNATIONAL (of which 1 is a bit unpleasant!) you should know about.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. 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.
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