Mincon Group plc (LON:MCON) is about to trade ex-dividend in the next two days. The ex-dividend date generally occurs two days before the record date, which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Mincon Group investors that purchase the stock on or after the 12th of November will not receive the dividend, which will be paid on the 4th of December.
The company's upcoming dividend is €0.0105 a share, following on from the last 12 months, when the company distributed a total of €0.021 per share to shareholders. Last year's total dividend payments show that Mincon Group has a trailing yield of 2.2% on the current share price of UK£0.785. 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! We need to see whether the dividend is covered by earnings and if it's growing.
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. Mincon Group is paying out just 20% of its profit after tax, which is comfortably low and leaves plenty of breathing room in the case of adverse events. A useful secondary check can be to evaluate whether Mincon Group generated enough free cash flow to afford its dividend. Dividends consumed 54% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.
It's positive to see that Mincon Group's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
See our latest analysis for Mincon Group
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Mincon Group's earnings per share have fallen at approximately 5.2% a year over the previous five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. It looks like the Mincon Group dividends are largely the same as they were 10 years ago. When earnings are declining yet the dividends are flat, typically the company is either paying out a higher portion of its earnings, or paying out of cash or debt on the balance sheet, neither of which is ideal.
The Bottom Line
From a dividend perspective, should investors buy or avoid Mincon Group? Earnings per share have fallen significantly, although at least Mincon Group paid out less than half of its profits and free cash flow over the last year, leaving some margin of safety. To summarise, Mincon Group looks okay on this analysis, although it doesn't appear a stand-out opportunity.
If you're not too concerned about Mincon Group's ability to pay dividends, you should still be mindful of some of the other risks that this business faces. To that end, you should learn about the 3 warning signs we've spotted with Mincon Group (including 1 which makes us a bit uncomfortable).
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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